Business owners succession planning in the COVID-19 era

COVID-19 and the associated quarantine forced business owners to take stock of their companies.

In this time of uncertainty, business owners want to review or create a succession plan. But there are two factors that often stand in the way of an owner moving forward with creating a succession plan: inconvenience and emotional barriers.

We'll discuss how creating a succession plan is becoming more convenient.

The law of trusts and estates has been slow to keep up with advances in technology. This has forced busy small and closely held business owners to travel to their attorneys' offices to sign paper documents in person. Early in the pandemic, estate planning attorneys took creative steps to ensure their clients signed their documents - like conducting a document signing on the hood of a car in the client's driveway.

As winter months approach, outdoor signings will no longer be feasible. As a result, Illinois introduced remote witnessing and notarization to sign estate planning and other documents during the Gubernatorial Disaster Proclamation for COVID-19.

Remote signings, where the witnesses and notary public appear using audio-video communication, are an important first step in bringing this area of the law current by using technology that has been available to lawyers in different practice areas for decades.

The existing process for remote signings can be tedious; it requires printing and signing paper documents, initialing every page during a recorded video conference, and collecting the witnesses' signatures within 24 hours of sending the documents to the witness. But it still saves business owners time and provides access for people who might not be able to travel.

For over 20 years Illinois has allowed electronic signatures in business contracts. During this time estate planning clients have rightly wondered why they can't also use DocuSign or other electronic signature programs to sign their wills and trusts.

In response the Trusts and Estates Section of the Illinois State Bar Association has drafted a bill to present to the Illinois General Assembly in January that makes (1) remote signings permanent; (2) relaxes some of the more arduous requirements of the current remote signing process; and (3) expands the process to allow clients to use electronic signatures to sign electronic documents that are easily transmitted between witnesses, attorneys and their clients.

The first question that comes to mind when someone raises electronic documents is, "Is it secure?" From a technology standpoint, the answer is "Yes."

First, the ISBA bill requires a security procedure to be built into the electronic signature that indicates if the document is tampered with after it has been signed. Most signature programs such as DocuSign, HelloSign and Adobe Sign meet this requirement. However, there is always a possibility that user practices - such as weak or shared passwords - might allow another person to access an electronic signature.

To combat this the ISBA bill requires two people to witness the will being signed, and any person who is a remote witness must check the identification of the person signing the will.

The convenience provided by electronic wills and remote witnessing should encourage small business owners to put their succession plans in writing. But there's also an emotional component to creating a business succession plan that owners frequently overlook. It's difficult to think about walking away from a successful business after spending years building it - whether the plan is to pass it on to a younger generation or to sell it to the highest bidder.

In these situations owners should recognize there is almost never a perfect plan. Owners are faced with merely making the best of a difficult but inevitable decision. However, any plan is better than the chaos that may destroy a closely held business when a key member of the organization leaves the business without a succession plan in place.

• Ray Prather, CPA, CFF of Prather Ebner, is chair of the Illinois State Bar Association's Section on Trusts and Estates.