If you have clients who own family businesses, very often the firm is the largest asset in their estate. Unfortunately, many business owners fail to address the need for succession planning because it is human nature to put off decisions concerning disability, retirement or death.

Upon the departure of a business owner, the business will be continued, sold or liquidated. Therefore, succession planning is necessary to ensure an orderly transition of power to new owners, and to provide continuity for employees and existing customers.

A properly drafted and adequately funded buy-sell agreement can provide financial protection for both the family and the business. Designed effectively, the plan can allow surviving family members and owners to enjoy ongoing economic support for multiple generations. Consequently, it is critical that you discuss succession planning with your business owner clients, regardless of which organizational structure they have established to operate their business.

Additionally, a business succession plan can help ensure that family members of a deceased owner receive fair value for the business interest and that surviving business owners secure control of the enterprise. Buy-sell agreements funded with life insurance can provide the infusion of cash–precisely when needed–to ensure the right property passes to the right person at the right time, in a tax-efficient manner.

To help your clients better understand the importance of creating a cohesive business succession plan, you might have to ask uncomfortable (or disturbing) questions. However, getting your prospects and clients to look closely at potential problems with their existing plan, or of not having a transition plan, will help them recognize that business succession planning is not a luxury but a necessity.

What follows is a list of questions for you to share with business owners of privately owned enterprises. Can your business owner clients answer all of them? If not, they’ll need your help and guidance to start the process of business succession planning.

1. Has the owner selected a successor? If yes, has the owner shared the selection with other family members, co-owners, employees and key customers?

2. Is there a formalized plan for successor ownership and has an attorney prepared a written buy-sell agreement? If yes, do the terms of the agreement clearly detail how each owner’s interests in the business will be distributed in the event of the disability, retirement, bankruptcy, divorce or death of an owner?

3. Do the business owners have a current business valuation, prepared by a competent valuation expert, for valuing each owner’s interest in the business? If yes, is the pricing formula fair to all parties? And does it include the value of goodwill, an intangible but often valuable asset?

4. Are children of one or more owners involved in the operation of the business? If yes, what financial arrangements have been made to provide for children who are not active in the business upon the departure of a business owner?

5. Would transitioning the business at retirement to surviving family members or other owners, possibly by an installment sale, cause a business owner to become financially dependent upon the future success of the business to maintain his or her standard of living?

6. If the business owner has selected a successor, when will the “baton be passed,” and what obstacles might prevent a smooth transition?

7. What knowledge about the management and operation of the business should the current owner share with the successor and at what point in time?

8. What employment options are available for members of the owner’s family who do not take an active role in management or operation of the business?

9. Does the current estate plan of the business owner distribute the business in equal shares to all children, whether or not a child works in the business? Is this fair to family members who are active in the business?

10. If the family business is to be distributed only to children who work in the business, are sufficient liquid assets available for distribution to a deceased owner’s surviving spouse, as well as children who are not active in the business? If not, it is often recommended that an irrevocable life insurance trust be established as an “estate equalization” device for the benefit of the non-active children.

11. Are there unstable marriages among the business owners or family members who are active in the business? If yes, what would be the effect of a divorce, and could ownership become diluted by having an owner’s interest in the business exposed to division as marital property in a divorce settlement?

12. Has the owner’s legal or tax advisor reviewed the buy-sell agreement during the past five years? If not, the provisions may be outdated or ineffective for establishing the fair market value of a deceased owner’s interest in the business, especially for intra-family transfers of a business.

While this list is not all-inclusive, it can help your clients take a step in the right direction. Most importantly, these questions will provide business owners with excellent reasons to address their transition-planning needs by encouraging them to assess honestly the consequences for business associates, customers, family members and themselves if they fail to plan.