The Missing Pillar in Succession Planning: What Happens If the Owner Loses Capacity First

A recent piece in the Wealth Strategies Journal, "Putting the Success in Succession Planning" by Katherine M. Sheehan, J.D., AEP, ATFA, lays out a genuinely useful framework for family business owners: successful transitions integrate estate planning, tax strategy, governance, and family dynamics, rather than treating succession as a single document or a single transaction. As Sheehan puts it, "succession planning is a continuing process, not a single transaction." That framing is worth taking seriously, and the article is worth reading in full.  It walks through discovery questions advisors should ask, the tension between equal and identical treatment among children with different roles in the business, the importance of keeping governing agreements current, the tax traps that come from planning too late (or too opportunistically), and a clear-eyed tour of the standard transfer techniques, from outright gifts to grantor trusts to GRATs.

What the article doesn't have much room to say (understandably, since its focus is on tax and transaction structure) is what happens when the owner's capacity, not just their eventual death or exit price, becomes the constraint. That gap is where elder law belongs in this conversation, and it deserves to be treated as a fifth pillar alongside the four Sheehan names, not an afterthought bolted onto the estate-planning piece.

Death Is the Predictable Trigger. Incapacity Is the One Nobody Plans For

Sheehan's discussion of governing agreements lists disability and incapacity among the triggering events a shareholder or operating agreement should address, and that's correct as far as it goes. But in practice, most closely held business owners we see have governing documents that handle death cleanly; there's a buy-sell provision, a valuation formula, and a funding mechanism.  Most, however, handle incapacity badly or not at all. That asymmetry matters more than it might seem, because incapacity, unlike death, doesn't resolve anything. It just freezes decision-making at the exact moment decisions are most needed: payroll still has to run, contracts still have to be signed, and a buyer's letter of intent still has to be responded to.

Without a plan, the default answer to "who signs for the company now?" is a guardianship or conservatorship proceeding, in which a court appoints someone to step into the incapacitated owner's shoes. That is close to the worst-case outcome for a business. It is public, it is slow, it typically requires court approval for major transactions, and it hands the outcome to a judge who has never met the company, the family, or the successor generation Sheehan spends so much of her article helping families evaluate. A business under conservatorship is not a going concern being carefully stewarded; it's an asset in limbo while the litigation clock runs on customers, lenders, and key employees who were never going to wait around to find out how it will be resolved.

The fix is not exotic. It's the same tools elder law attorneys reach for in almost every incapacity-planning conversation: a trust to manage life-time decision-making, explicitly addressing business decision-making, coupled with a strong competency clause appointing a primary care doctor, or other trusted professional, to make binding decisions regarding competency and capacity, together with a durable power of attorney that specifically and explicitly addresses business decision-making, rather than a generic financial power of attorney that a bank or transfer agent will hesitate to honor when a signature line reads "President and CEO."  A successor trustee named in advance, who already knows the family and the succession plan because they were part of the conversations Sheehan describes, can step in immediately and without a court filing. That is the entire difference between a transition and a crisis.

The Family-Dynamics Section Gets Harder, Not Easier, as the Owner Ages

Sheehan is right that regular family meetings and independent consultants help prevent the surprises that damage relationships, and that equal treatment among children doesn't require identical treatment when their roles in the business differ. Those points track closely with what we've written here before about family harmony in estate administration generally: beneficiaries who understand the reasoning behind a plan, because the person who made it explained it to them while still able to answer questions, are far less likely to contest it later.

The complication specific to aging business owners is that the window for that conversation is often shorter and less predictable than families assume. A plan that gets rewritten or finalized only after a health scare — after the diagnosis, after the first hospitalization, after the family has already started quietly worrying about the person's judgment — invites exactly the kind of substance-over-form scrutiny we discuss routinely regarding late-in-life planning.  Late, isolated changes to who controls a valuable asset are the single most common fact pattern behind will and trust contests. The lesson isn't unique to businesses, but businesses raise the stakes considerably because the "asset" in question is everyone's livelihood, and because a successor's fitness to run the company is a much more loaded question than a successor's fitness to inherit a bank account. The honest answer is that succession planning for a family business should start earlier than most owners are emotionally ready for it — not because death or incapacity is imminent, but precisely because nobody can know in advance whether it will be.

The Liquidity Event Is Also an Aging-in-Place Planning Event

Sheehan's closing point, that a sale or transfer changes the balance sheet but doesn't complete the planning, deserves one more layer for owners in or approaching their later years. A liquidity event that converts an illiquid, hard-to-value business into a diversified portfolio isn't just a tax and investment-policy question. For an aging owner, it is very often the first time there is enough accessible, liquid wealth to actually fund the kind of care they'd prefer as they age: in-home care, modifications that let them stay in their own house, geriatric care management, the sort of support that a personal care agreement can formalize and compensate family caregivers for providing. 

That money should be positioned with that purpose in mind,  held in a trust structure that can respond to a long-term care need without a new round of court involvement, and coordinated with the same updated powers of attorney, healthcare directives, and beneficiary designations Sheehan rightly flags as post-sale housekeeping. A founder who spent decades building a company's resilience deserves a resilient plan.

None of this competes with Sheehan's framework; it completes it. Estate planning, tax strategy, governance, and family dynamics address who ultimately owns and runs the business. Incapacity planning answers a narrower but more urgent question: who is legally authorized to act tomorrow, if the owner can't. Every family business succession plan should be able to answer both.

Coordinating Business and Estate Planning Documents: The Not-so-happy Lesson from TV Painter Bob Ross

Celebrity estates often serve as object lessons of how, and how not to, design estate and business plans.  The estate of Bing Crosby is widely hailed as instructive in the use of trusts to avoid probate and protect privacy.  Unfortunately, the estate of TV painter Bob Ross, serves as a cautionary tale regarding the failure to coordinate estate and business planning documents.  

Bob Ross rose to fame in the 1980s as the host and instructor of the wildly popular Joy of Painting TV show. Viewers were drawn to his artistic techniques, mesmerizing voice, and congenial manner. The result of his death was less than congenial as  nasty legal war erupted between his business partners and family. 

Bob Ross Inc. was formed by Ross, his wife Jane, and their friends Walter and Annette Kowalski. Although the four were equal partners, Ross was its widely recognized public face. From 1986 through 1994 the company registered several trademarks using Bob Ross’ name and likeness, with Bob’s written consent, and also signed several licensing agreements with third parties, also with Ross’ consent.

In 1992, Bob’s wife Jane passed away. The business structure required that any shares of a deceased partner were to be distributed equally among the surviving partners. And that is how Ross, despite being the public face of the Bob Ross juggernaut, found himself with only a one-third interest in the company.

Shortly after Jane passed, Ross developed lymphoma. The prognosis was sadly grim. In 1994, while battling the disease that would take his life one year later, the Kowalskis approached Ross. They presented him with a contract giving the Kowalskis all commercial rights to Ross’ name, image, voice, biographical material, and creative works. In return, the Kowalskis would pay Ross or his surviving heirs ten percent (10%) of Bob Ross Inc, profits,  but only for the next ten years.  After ten years the Kowalskis, and not the Ross family, would own and receive all income from Bob Ross, Inc. 

Ross was reportedly infuriated and refused to sign the agreement. Instead, he modified his estate plan in an attempt to keep intellectual rights to everything Bob Ross in his own family. He created the Bob Ross Trust in 1994, assigning 51% of the interest in all intellectual property to his brother, Jimmie Cox, and 49% to his son, Steve Ross.

Ross died July 4, 1995 at age 52, leaving an estate valued at $1.3 million, half of which was his interest in Bob Ross Inc. The Kowalskis, unsuccessful at gaining control of the business while Ross was alive,  sued the estate. In addition to asking for all intellectual rights, the Kowalskis wanted all of Ross’ finished paintings and tools.

Unable to finance a prolonged legal battle, Cox, the estate executor, settled with the Kowalskis. The Estate and the Trust also signed separate Mutual Releases with Bob Ross Inc. stating that the parties and their heirs, assigns, successors in interest, etc., “do, now and forever, absolutely and irrevocably, hereby release each other in and from any and all claims, suits, liabilities, complaints, losses, damages, and charges of every kind and character arising prior to the date of execution hereof.”

Two decades after the lawsuit settled, Steve Ross, the son, realized there was a clause in his father’s trust that bequeathed to him all rights to his father’s name, likeness, and publicity. By then, Bob Ross had become an even bigger and more lucrative business, with the sale of Bob Ross bobbleheads, chia pets, mugs, and even action figures. The streaming services Twitch and Netflix had since picked up The Joy of Painting shows. Calm, the meditation app, even offered a Bob Ross sleep app.  The Kowalskis had deftly managed and grown the Bob Ross business enterprise.

Armed with this newfound knowledge about his father’s trust, Steve sued Bob Ross Inc. He alleged that all the Bob Ross Inc. business deals and products that used his father’s likeness were unauthorized. He demanded compensation. Unfortunately for Steve, the federal judge didn’t agree. The court ruled that Ross’ trust could not have given away the rights to Steve, because the trust did not own those rights to begin with. The ruling stated: “Plaintiff would not own the intellectual property at issue because the Trust never owned it. Similarly, because Bob Ross gave BRI his right to publicity during his lifetime, it could not have transferred to his son on his death.”

Bob Ross’ trust said Steve was to inherit the intellectual rights, but the trust was never funded with the rights, and could not, therefore, direct them.  The business agreement prevailed. Steve received nothing from the business empire built on his father’s likeness, reputation, or artistic techniques.

Source: "TV Painter Bob Ross’ Son Loses Lawsuit In Battle Between Father’s Trust And Business Agreement," (June 13, 2021) (last accessed 6/17/2021). 

Credit Card Debt Will Follow the Younger Generation to the Grave

Younger Americans not only take on relatively more credit card debt than their elders, but they are also paying it off at a slower rate, according to a first-of-its-kind study conducted by Ohio State’s Center for Human Resource Research.

The findings suggest that younger generations may continue to add credit card debt into their 70s, and die still owing money on their credit cards.

“If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” said Lucia Dunn, co-author of the study and professor of economics at Ohio State University. Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies.”

The results suggest that a person born between 1980 and 1984 has credit card debt substantially higher than debt held by the previous two generations: on average $5,689 higher than his or her “parents” (people born 1950-1954) and $8,156 higher than his or her “grandparents” (people born 1920 to 1924).  In addition, the results suggest younger people are paying off their debt more slowly, too.  The study estimates that the children’s payoff rate is 24 percentage points lower than their parents’ and about 77 percentage points lower than their grandparents’ rate. 

But the study also did uncover some good news: Increasing the minimum monthly payment spurs borrowers to not only meet the minimum, but to pay off substantially more, possibly eliminating their debt years earlier.

The study underscores the challenges younger folks are facing that cause and encourage debt.  In addition to the economic woes under which we all labor, are cultural changes that encourage spending.  Stuart Vyse, professor of psychology at Connecticut College, describes them in his book "Going Broke: Why Americans Can't Hold On to Their Money."  Professor Vyse argues that the mountain of debt burying so many of us is the inevitable byproduct of America's turbo-charged economy and, in particular, of social and technological trends that undermine self-control, including the rise in availability and use of the credit card, increase in state lotteries and casino gambling, and expansion of new shopping opportunities provided by toll-free numbers, home shopping networks, big-box stores, and the Internet which create twenty-four hour instantaneous marketplaces.  Professor Vyse reveals how vast changes in American society over the last 30 years have greatly complicated our relationship with money. 

These trends and harsh realities should inform our financial, estate, and business succession planning. 

Business Succession Planning Neglected

Transitioning a business to the next generation or to new ownership is a reality that affects most business owners.  Ideally, business owners should begin developing a succession plan five to ten  years before exiting the business.  Of course, one cannot know for sure when succession will take place.  Those that plan for business succession, often plan only for retirement.

Health concerns, however, can compel succession earlier than expected.  A business owner's incapacity, incompetency, or disability may render the owner incapable of transitioning a business to a successor.  But, death is unquestionably the most severe of the reasons compelling succession of a business. Given the risk that a poorly planned succession might rob the business owner's heirs of a substantial inheritance, and risk otherwise guaranteed inheritance by burdening an estate and heirs with debts and obligations, one would assume that most business owners consider carefully succession of their business. 

Many, however, aren't thinking about it at all.