Insights · Owner Money Types
The Architect: When You Have a Plan and Need to Keep It Current
You have a plan, it is written down, and the accounts behind it are funded on a schedule. That puts you ahead of most owners, and the honest thing to say is that the basics are handled. The risk you carry is a different one. Plans do not usually fail because they were wrong. They fail because the business changed and the plan did not, and nothing announces that it has happened.
This is one of four Owner Money Types. If you have not taken it yet, the two-minute owner quiz will tell you which pattern your answers fit. The types describe patterns, not people, and plenty of owners recognize themselves in more than one.
How This Shows Up
Drift is quiet by definition. The documents still exist, the accounts still get funded, and everything looks the same from the outside. What changed is the business underneath them.
Revenue moved into a different range. Payroll grew. A partner came in, or left. The entity was restructured for a reason that had nothing to do with your personal plan. Any one of those can make a design that was correct three years ago into one that is merely still in place.
The Seams Are Where Things Break
Individual documents rarely go bad on their own. What goes bad is the relationship between them, because each was updated by a different person at a different time for a different reason.
Beneficiary designations are the most common example. They sit on the account, not in the will, and they generally control regardless of what the estate documents say. An owner who updates a trust and never touches the designations has two documents that now disagree, and the one that wins is the one nobody looked at.
Buy-sell agreements are the second. Plenty of them are signed and comparatively few are funded, and an unfunded agreement describes an obligation without providing the means to meet it. Business valuations inside those agreements also age, sometimes badly, and an agreement pointing at a number from five years ago is a different agreement than the one you signed.
Retirement plan design is the third. Plan types have eligibility and contribution mechanics tied to payroll and to entity type. Change either one and the design you chose may no longer be the design that fits, even though the plan is still running normally.
An Order of Operations for an Architect
The work here is verification rather than construction, which makes it easier and also easier to postpone.
- Put a date on every document. Estate documents, buy-sell, insurance policies, retirement plan documents, entity filings. Not the date you think. The date on the paper. Anything older than the last significant change to your business gets flagged.
- Check the seams against each other. Beneficiary designations against the estate documents. Buy-sell funding against the buy-sell obligation. Insurance amounts against what the business currently looks like rather than what it looked like when the policy was written.
- Re-decide the salary and distribution split every year. This is not a set-and-forget decision. It moves with payroll, entity type, retirement contribution ceilings, and how much cash the business needs, and each of those changes on its own schedule.
- Do the exit-readiness work even with no exit planned. Clean books, contracts that survive a change in ownership, and an operation that runs without you are worth having regardless of whether you sell. They are also the specific things that cannot be created quickly, which is why they belong in a plan that is already ahead.
- Hold one coordinated review a year with everyone in it. CPA, attorney, and advisor in the same conversation rather than three separate ones. The point is to catch the disagreements between them, and those only surface when the assumptions are stated side by side.
Do This Week
Pick four documents. Your estate documents, your buy-sell, your primary insurance policy, and your retirement plan document. Find the date on each one.
Then write down the date of the last significant change to your business. If any document predates it, you have found where to start, and you found it in about twenty minutes.
Where This Gets Complicated
Verification is straightforward when you know what to check. The difficulty is that the seams do not announce themselves, and each one lives at the boundary between two professionals who each believe the other has it.
Your attorney assumes the beneficiary designations were handled with the accounts. Whoever opened the accounts assumed the estate plan governed. Both assumptions are reasonable and together they produce a gap. Someone has to be responsible for looking at the boundary rather than the pieces, and on a plan that is otherwise in good shape, that is most of the remaining work.
Frequently Asked Questions
How often should a plan be reviewed?
Annually as a baseline, and additionally whenever something structural changes: an entity change, a partner joining or leaving, a significant shift in revenue or payroll, a marriage or divorce, or a new child. The calendar review catches drift. The event-driven review catches the changes that make a design obsolete immediately rather than gradually.
What usually goes stale first?
Beneficiary designations, because they live on the account rather than in the estate documents and generally control regardless of what those documents say. Buy-sell funding is close behind, since agreements are frequently signed and less frequently funded. Retirement plan design is third, because it is tied to payroll and entity type and both of those move without anyone thinking about the plan.
Do I need an advisor if I already have a plan?
Not necessarily, and that is a real answer rather than a polite one. What a plan at this stage needs is someone accountable for checking the seams between documents and for keeping the annual decisions on a schedule. If you are genuinely doing that yourself, you are doing the work. If it has been getting postponed because there is no deadline attached to it, that is the thing to solve, whether you solve it internally or hire it.
Keep Reading
- Exit-Ready: What Selling Your Business Someday Requires You to Do Now
- The Financial Order of Operations for Business Owners
- The Owner's Money Map, the full guide, free and with no email required