Sold my HVAC company about three years ago. Life got busy, I traveled, spent time with grandkids, and just never got around to updating my will, power of attorney, and the trust that holds the proceeds. Now I'm trying to fix it and it's a mess. My old attorney retired, the documents reference my old business structure, and my estate plan still lists my ex-brother-in-law as a trustee. I'm sharing this because I don't want anyone else to coast after the sale and assume everything is fine. It's not. Get it done early.
Exit Planning
Why you shouldn't wait years after your exit to update your legal paperwork
How long did you actually wsit? Three years doesn't sound insane on the surface but if the documents were already stale before the sale it compounds.
This is a real problem. I see it constantly with clients who sell and then disappear for a year or two. The proceed structure often requires a different estate plan than the operating business did. Especially if there was an installment sale or a holdback.
Wait, your ex-brother-in-law is still the trustee? That's rough. Did he know? Has he been acting in that role?
He knew but never did anything. No distributions, no decisions. Just sat there. Which is its own problem because now there's a question of whether he formally resigned or was removed.
Honest question, what's the actual risk? If nothing happened and no oone challenged anything, is it really a mess or just paperwork that needs freshening up?
The risk depends on what happens while the documents are stale. If you become incapacitated and your POA names someone you no longer trust, that person has authority. If you die, your will goes through probate with the old structure referenced. It can be fixed but it costs more and takes longer. And in some cases it can't be fixed the way you watnt because the person with standing objects.
The ex-brother-in-law thing is the scary part to me. Someone with a grudge or even just apathy sitting in a fiduciary seat is a bad setup.
Did your old attorney at ldast keep copies or was everything with you? Mine retired and sent me a box of files with a note that said good luck. Not ideal.
I had copies of the signed documents. He had the originals for the trust. When he retired he sent them back but it took weeks to track him down.
Seen this from the other side. I bought a business from a guy who hadn't updated anything. The sale contract referenced a trust that no longer matched his situation and it delayed closing by a month. Not the the same as your situation but related.
The bigger issue issue is usually the proceeds. If you sold for a lump sum and put it in a trust, that trust needs to be the beneficiary of the accounts, the LLC, whatever holds the assets. If the old documents still list the operating company as the primary asset it creates confusion.
Yes. And if the sale included a consulting agreement or earnout, those payments can flow for years. If the recipient dies or becomes incapacitated mid-stream, the paperwork needs to match the payment stream. Otherwise you get a fight over who receives the remaining payments.
I don't know, three years seems fast to call it a mess. People go decades without touching this stuff. Most of the time nothing happens.
That That's true until it isn't. The cost of waiting is asymmetric. Usually zero, occasionally catastrophic.
Is there a practical window people recommend? Like update within six months of closing or something?
What I was told by my new attorney is that the trigger should be the exit itself, not a date on the calendar. The sale changes your asset mix, your beneficiaries' situation, and often your state of residence if you move. So when those things change you update. For me all three changed within a year of closing. I just didn't act on it.