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Beginning in 2026, individuals who itemize deductions and donate to charity will face a new limit on their charitable deductions. And in some cases, they’ll face two new limits. But there’s some good news for nonitemizing individuals who make charitable donations. New charitable deduction floor Under the One Big Beautiful Bill Act (OBBBA), starting in 2026, if you itemize deductions, your otherwise allowable charitable deduction will be reduced by 0.5% of your adjusted gross income (AGI). Put another way, your 2026 charitable deduction will be limited to the amount that exceeds 0.5% of your 2026 AGI. AGI includes all taxable income items and is reduced by above-the-line deductions like the write-offs for traditional IRA contributions, self-employed retirement plan contributions, self-employed health insurance premiums, 50% of self-employment tax, qualified education loan interest expense and Health Savings Account contributions. Let’s look at an example: You and your spouse file jointly in 2026. Your AGI is $400,000 and you make charitable donations of $10,000. Your allowable itemized charitable deduction for 2026 is limited to $8,000 [$10,000 − (0.5% × $400,000)]. New itemized deduction limitation Also under the OBBBA, beginning in 2026, itemized deductions — including charitable deductions — for individuals in the top federal income tax bracket of 37% will be reduced by the lesser of: 1) 2/37 times the amount of otherwise allowable itemized deductions, or 2) 2/37 times the amount of taxable income (before considering those deductions) in excess of the applicable threshold for the 37% tax bracket. That sounds complicated, but generally the limitation will mean that the tax benefit of itemized deductions for taxpayers in the 37% bracket will be as if they were in the 35% bracket. When a taxpayer has charitable deductions, the charitable deduction floor rule will be applied before the itemized deduction limitation. However, only high-income individuals will be affected by the itemized deduction limitation. Planning tips for 2025 and beyond If you’ll itemize this year and next, consider advancing some charitable donations that you normally would make in 2026 into this year to avoid the impact of the new 0.5%-of-AGI charitable deduction floor that will take effect next year. In future years, consider taking steps to reduce your AGI to minimize the impact of the charitable deduction floor. For instance, you can recognize capital losses from securities held in taxable brokerage accounts and make bigger deductible or pretax retirement plan contributions. Another option is to bunch your charitable giving into alternating years. For example, instead of donating $10,000 to charity every year, donate $20,000 every other year. Because the charitable deduction reduction is based on AGI, not the amount of the deduction, you can increase your tax benefit with this strategy (assuming your AGI is steady from year to year). In the previous example, if you make $10,000 in donations in 2026 and another $10,000 in 2027 and your AGI remains at $400,000 for both years, each year your deduction will be reduced by $2,000, for a total deduction over two years of $16,000. But if you bunch your donations into 2027, your 2027 $20,000 deduction will be reduced by that same $2,000. You won’t have an itemized charitable deduction for 2026, but your total deduction for the two-year period will be $18,000. It’s important to review your overall tax picture before implementing a bunching strategy. For example, if not being able to claim an itemized charitable deduction on your 2026 income tax return would push you into a higher income tax bracket, then bunching may not be beneficial. New charitable deduction for nonitemizers If you don’t have enough total itemized deductions — including charitable donations — to exceed your standard deduction, you’ll save more tax by claiming the standard deduction. In recent years, including 2025, nonitemizers haven’t been allowed to deduct any charitable contributions. But starting in 2026, the OBBBA reinstates the COVID-era deduction for cash donations by nonitemizers, subject to an increased annual limit of $1,000, or $2,000 for joint filers. (The limits were $300 and $600, respectively, for 2021 when this nonitemizer deduction was last available.) The definition of “cash contribution” may be broader than you think. It includes gifts made by debit or credit card, check, ACH, online payment platform, and payroll deduction. But be aware that this deduction doesn’t reduce your AGI. This year and next Limits to charitable deductions are nothing new. Limits beyond the ones discussed here have long applied. For example, only donations to qualified charities are eligible, proper substantiation is required, and other AGI-based limits apply in certain situations. Contact us to discuss what you can deduct on your 2025 return, last-minute 2025 planning opportunities and your 2026 donation strategy. © 2025 

If your business has employees or uses independent contractors, you have associated annual information reporting obligations. The One Big Beautiful Bill Act (OBBBA) makes changes impacting these rules, but not for the 2025 tax year. Tips and overtime income For 2025 through 2028, the OBBBA creates new deductions for employees who receive qualified tips income or qualified overtime income. Importantly, these breaks aren’t income exclusions. Therefore, federal payroll taxes and federal income tax withholding rules still apply to this income. Also, qualified tips and qualified overtime may still be fully taxable for state and local income tax purposes where applicable. The issue for employers and payroll management firms is reporting qualified tips and qualified overtime amounts so eligible workers can claim their rightful federal income tax deductions. In August, the IRS announced that, for tax year 2025, there will be no OBBBA-related changes to federal information returns for individuals, federal payroll tax returns or federal income tax withholding tables. So, the 2025 versions of Form W-2, Forms 1099, Form 941 and other payroll-related forms and returns aren’t being changed. In November, the IRS issued guidance on how taxpayers who’ve received tips or overtime in 2025 can determine their eligibility and calculate their deductions, considering that employers and others aren’t required to provide information reporting specific to qualified tips income or qualified overtime income for the 2025 tax year. Employers and payroll management firms may voluntarily report 2025 qualified tips in Box 14 (“Other”) of Form W-2 or a separate statement. Those that pay overtime, at minimum, should be prepared to answer employee questions about whether they’re considered to be Fair Labor Standards Act employees and thus potentially eligible for the qualified overtime deduction for 2025. Eligible occupations for the tips deduction In September 2025, the IRS released proposed regulations that include a list of dozens of occupations that are eligible for the OBBBA deduction for qualified tips income. Eligible occupations have been given a three-digit code to be used by employers for information return purposes. Eligible occupations are grouped into eight categories: beverage and food service, entertainment and events, hospitality and guest services, home services, personal services, personal appearance and wellness, recreation and instruction, and transportation and delivery. Draft 2026 Form W-2 In September 2025, the IRS also released a draft of the 2026 Form W-2. The draft form incorporates changes to support the new employer reporting requirements for employee deductions for qualified tips income and qualified overtime income, as well as employer contributions to Trump accounts (which will become available in 2026 to provide a tax-advantaged savings opportunity for children). For Box 12 of the draft form, new codes are provided for the following: “TA” to report employer contributions to Trump accounts, “TP” to report the total amount of an employee’s qualified tips income, and “TT” to report the total amount of an employee’s qualified overtime income. Box 14b has been added for employers to report the occupation of an employee who receives qualified tips income. Eased information return rules While the deductions for qualified tips and overtime will add to the information reporting requirements for businesses, the OBBBA also provides some reporting relief. This relief also starts with the 2026 tax year. Businesses generally must report on annual information returns, such as Form 1099-MISC, payments made during the year that equal or exceed the threshold for rents, royalties, premiums, annuities, remuneration, emoluments, or other fixed or determinable gains, profits, and income. In addition, businesses that receive business services generally must report on annual information returns, such as Form 1099-NEC, payments made during the year for services rendered that equal or exceed the statutory threshold. For many years, the threshold for Forms 1099-MISC and 1099-NEC has been $600. Effective for payments made after 2025, the OBBBA increases the reporting threshold to $2,000, with inflation adjustments for payments made after 2026. This change will impact information returns that should be filed in early 2027 to report affected 2026 payments. Stay up to date Additional guidance on reporting requirements for qualified tips income and qualified overtime income is expected, and eventually final 2026 information reporting forms will be released. Contact us to keep up to date on developments and what you need to do to ensure your business is compliant with evolving reporting requirements. © 2025 

The One Big Beautiful Bill Act (OBBBA) creates new income tax deductions for tax years 2025 through 2028 for qualified cash tips and overtime compensation. If you receive tips or overtime pay, you likely have questions about whether you’re eligible for a deduction and how big it might be. The IRS has issued guidance on how workers can determine the amount of their deductions for 2025, because employers aren’t required to provide detailed information on tips income or overtime compensation until the 2026 tax year. Here’s an overview of what you need to know. The new deductions Rather than eliminating taxes on all tips income and overtime compensation, the OBBBA establishes partial deductions available to both itemizers and nonitemizers, subject to income-based limitations. Qualified tips income and overtime compensation remain subject to federal payroll taxes and state income and payroll taxes where applicable. Moreover, because the tax breaks are in the form of deductions claimed at tax time, employers must continue to withhold federal income taxes from employees’ paychecks. For qualified tips, you may be able to claim a deduction of up to $25,000. “Qualified tips” generally refers to cash tips received by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024. The tips must be paid voluntarily, without any consequence for nonpayment, in an amount determined by the payor and without negotiation. Proposed IRS regulations identify 68 eligible occupations within the following categories: Beverage and food service, Entertainment and events, Hospitality and guest services, Home services, Personal services, Personal appearance and wellness, Recreation and instruction, and Transportation and delivery. The tips deduction begins to phase out if your modified adjusted gross income (MAGI) exceeds $150,000, or $300,000 if you’re married filing jointly. The deduction is completely phased out if your MAGI reaches $400,000, or $550,000 if you’re a joint filer. The overtime deduction is limited to $12,500, or $25,000 if you’re a joint filer. A phaseout begins if your MAGI exceeds $150,000, or $300,000 if you’re a joint filer. The deduction is completely phased out if your MAGI reaches $275,000, or $550,000 if you’re a joint filer. The overtime deduction is available for overtime pay required by the Fair Labor Standards Act (FLSA), which generally mandates “time-and-a-half” for hours that exceed 40 in a workweek. Notably, though, the deduction applies only to the pay that exceeds the regular pay rate — that is, the “half” component. Because the FLSA definition of overtime varies from some state law definitions, overtime pay under state law might not be deductible. And the deduction doesn’t apply to overtime paid under a collective bargaining agreement or that an employer pays in excess of time-and-a-half (for example, double-time). The tips deduction calculation Employers won’t be required to include the total amount of cash tips reported by the employee and the employee’s occupation code on Form W-2 until the 2026 tax year. So, for 2025, according to the IRS, if you’re an employee, you can calculate your tips deduction using: Social Security tips reported in Box 7 of Form W-2, The total amount of tips you reported to your employer on Forms 4070, “Employee’s Report of Tips to Employer,” or similar forms, or The total amount of tips your employer voluntarily reports in Box 14 (“Other”) of Form W-2 or a separate statement. You may also include any amount listed on Line 4 of the 2025 Form 4137, “Social Security and Medicare Tax on Unreported Tip Income,” filed with your 2025 income tax return (and included as income on that return). Note that you’re responsible for determining whether the tips were received as part of an eligible occupation. If your employer opts to provide this or other relevant information in Box 14 (“Other”) of Form W-2, you may rely on it. Tips also won’t be required to be reported on Forms 1099 until the 2026 tax year. For 2025, if you’re an independent contractor, you can corroborate the calculation of your qualified tips with: Earnings statements, Receipts, Point-of-sale system reports, Daily tip logs, Third-party settlement organization records, or Other documentary evidence. Note: Nonemployees must confirm that their tips were received from an eligible occupation. The overtime deduction calculation Employers won’t be required to include eligible overtime pay on Form W-2 until the 2026 tax year. So for 2025, if you’re an employee, you can self-report your overtime compensation for the overtime deduction. According to the IRS, you must make a “reasonable effort” to determine whether you’re considered to be an FLSA-eligible employee. The IRS says this may include asking your employers or other service recipients about your FLSA status. To calculate the deduction amount, you must use “reasonable methods” to break out the amount of overtime pay that qualifies. For example, if you were paid time-and-a-half and receive a statement with your total amount for overtime (regular wages plus the overtime premium), then you can use one-third of the total. If you were paid double-time and receive such a statement, you can multiply the total dollar amount by one-fourth to compute the qualifying overtime pay. A tax-saving opportunity If you might be eligible for the tips or overtime deduction, don’t miss out on this tax-saving opportunity just because your deduction may be difficult to calculate. We’re here to help. If you’re an employer with employees who receive tips or overtime income, we can also provide guidance on how to answer employee questions for 2025 and how to ensure you’re in compliance with reporting requirements for 2026. © 2025 

For many, the primary reason for creating an estate plan is to ensure their assets are passed on to family members according to their wishes. But when it comes to estate planning, not all assets are created equal. One asset type that can be tricky to transfer to beneficiaries is firearms. According to a Pew Research Center survey, nearly a third of adults (32%) said they own a gun. Another 10% replied that they don’t personally own a gun but someone in their household does. If you own one or more guns, careful planning is required to avoid running afoul of complex federal and state laws. Understanding the law Firearms are unique among personal property because federal and state laws prohibit certain persons from possessing them. For example, under the federal Gun Control Act, “prohibited persons” include: Convicted felons, Fugitives, Unlawful drug users or addicts, Mentally incompetent persons, Illegal or nonimmigrant aliens, and Persons convicted of certain crimes involving domestic violence or subject to certain domestic violence restraining orders. Other persons may be prohibited from receiving firearms under state or local laws. These restrictions apply not only to your beneficiaries, but also to executors or trustees who come into possession of firearms. In addition, under the federal National Firearms Act (NFA), certain firearms must be registered with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and transfers of such firearms must follow NFA procedures. The classification of some firearms has become more complex because of litigation and evolving ATF rules. Furthermore, additional steps must be taken when transporting guns across state lines. States may also require registration and may impose mandatory background checks, permits and other requirements for firearms. Consider a gun trust Incorporating a gun trust into your estate plan can be an effective way to manage and transfer firearms. A gun trust allows multiple designated trustees to legally possess and use the firearms, helping families avoid the risk of accidentally violating federal law. By placing these assets in a trust, owners can also streamline how the firearms are handled if they become incapacitated, ensuring that only authorized individuals retain lawful access. From an estate planning perspective, a gun trust can provide privacy, continuity and clearer instructions for heirs. Firearms transferred through a properly drafted trust often avoid the delays and potential complications of probate, while giving the grantor control over who receives the weapons and under what conditions. Seek professional estate planning advice If you own a valuable gun collection and want to pass it on to heirs, it’s critical to consult with a qualified estate planning attorney. Indeed, given the complexity of federal and state gun laws, a gun trust may be the proper vehicle to transfer this type of asset. © 2025 

Is your company spending enough on cybersecurity? Unfortunately, it’s a question every business owner must contemplate carefully these days. The 2025 Security Budget Benchmark Report found that cybersecurity budgets increased by 4% this year, based on survey responses from nearly 600 Chief Information Security Officers collected by IANS Research and Artico Search. That may sound impressive. But it’s a notable decline from the 8% budget growth in 2024 and the lowest rate in five years, according to the annually conducted report. This trend suggests that many businesses are balancing cybersecurity needs with broader macroeconomic pressures, including constrained hiring and rising operating costs. With cyberattacks on the rise, thoughtful budgeting is essential to mitigate your company’s exposure. Deciding how much is enough If you’ve never created a cybersecurity budget, you’re not alone. Very small businesses often fold these costs into general technology spending. However, as your company grows, cybersecurity becomes a core part of risk management. A dedicated budget helps ensure you’re allocating enough resources to protect operations; maintain compliance obligations; and preserve the trust of customers, employees and other stakeholders. After deciding to create a cybersecurity budget, you must answer an inevitable question: How much is enough? There’s no single percentage that applies to every business. Generally, spending should align with a company’s reliance on technology and risk exposure. Businesses that depend heavily on digital systems or store confidential information typically require more robust protections than those with simpler environments. Begin by reviewing your current technological infrastructure for factors such as: How your systems are set up and managed, What protections are already in place, and Whether past issues (such as phishing attempts or notable downtime) indicate vulnerabilities. Many businesses find value in formal cybersecurity assessments. These intensive evaluations clarify your risk exposure and provide a more informed basis for budgeting. Some companies conduct assessments internally using established frameworks, while others engage external professionals to avoid bias and access specialized expertise. Building the budget When you have all the pertinent information in hand, identify what you need to do to maintain existing defenses and shore up weaknesses — and calculate how much you need to spend. Most companies have recurring cybersecurity expenses, such as: Software subscriptions, System updates, Data backups, and External monitoring or support. Your cybersecurity budget should also account for periodic enhancements as your technology evolves or new threats emerge. Although unexpected upgrades may still be necessary — particularly if your business experiences a cyberattack — planning as far in advance as possible makes spending more predictable and easier to manage. Adding it as a line item Today’s business owners must view potential cyberattacks as likely rather than unlikely. Thus, cybersecurity is most effective when treated proactively as an ongoing priority rather than something addressed only occasionally or after a problem arises. Adding your cybersecurity budget as a recurring line item to your overall annual budget supports consistent investment and helps you plan for long-term improvements without sudden financial strain. Just as you revisit and revise your overall budget throughout the year, review cybersecurity spending at least once annually. Your needs may increase as your business grows or adopts new technology. And as the aforementioned survey shows, cybersecurity budgets tend to fluctuate from year to year. Pay close attention to yours to ensure it remains aligned with your operational needs and strategic objectives. Reducing risk In addition to severely disrupting operations, cyberattacks create financial risk through downtime, recovery costs, and potential legal or compliance consequences. We can help you evaluate costs, set priorities and identify the most impactful investments — whether you’re developing a cybersecurity budget for the first time or refining an existing one. © 2025 

You likely have a lot of things to do between now and the end of the year, such as holiday shopping, donating to your favorite charities and planning get-togethers with family and friends. For older taxpayers with one or more tax-advantaged retirement accounts, as well as younger taxpayers who’ve inherited such an account, there may be one more thing that’s critical to check off the to-do list before year end: Take required minimum distributions (RMDs). Why is it important to take RMDs on time? When applicable, RMDs usually must be taken by December 31. If you don’t comply, you can owe a penalty equal to 25% of the amount you should have withdrawn but didn’t. If the failure is corrected in a “timely” manner, the penalty drops to 10%. But even 10% isn’t insignificant. So it’s best to take RMDs on time to avoid the penalty. Who’s subject to RMDs? After you reach age 73, you generally must take annual RMDs from your traditional (non-Roth): IRAs, and Defined contribution plans, such as 401(k) plans (unless you’re still an employee and not a 5%-or-greater shareholder of the employer sponsoring the plan). An RMD deferral is available in the initial year, but then you’ll have to take two RMDs the next year. If you’ve inherited a retirement plan, whether you need to take RMDs depends on various factors, such as when you inherited the account, whether the deceased had begun taking RMDs before death and your relationship to the deceased. When the RMD rules do apply to inherited accounts, they generally apply to both traditional and Roth accounts. If you’ve inherited a retirement plan and aren’t sure whether you must take an RMD this year, contact us. Should you withdraw more than required? Taking no more than your RMD generally is advantageous because of tax-deferred compounding. But a larger distribution in a year your tax bracket is low may save tax. Be sure, however, to consider the lost future tax-deferred growth and, if applicable, whether the distribution could: 1) cause Social Security payments to become taxable, 2) increase income-based Medicare premiums and prescription drug charges, or 3) reduce or eliminate the benefits of other tax breaks with income-based limits, such as the new $6,000 deduction for seniors. Also keep in mind that, while retirement plan distributions aren’t subject to the additional 0.9% Medicare tax or 3.8% net investment income tax (NIIT), they are included in your modified adjusted gross income (MAGI). That means they could trigger or increase the NIIT because the thresholds for that tax are based on MAGI. Do you have to take any RMDs in 2025? The RMD rules can be confusing, especially if you’ve inherited a retirement account. If you’re subject to RMDs, it’s also important to accurately calculate your 2025 RMD. We can help ensure you’re in compliance. Please contact us today. © 2025 

Interest paid or accrued by a business is generally deductible for federal tax purposes. But limitations apply. Now some changes under the One Big Beautiful Bill Act (OBBBA) will result in larger deductions for affected taxpayers. Limitation basics The deduction for business interest expense for a particular tax year is generally limited to 30% of the taxpayer’s adjusted taxable income (ATI). That taxpayer could be you or your business entity, such as a partnership, limited liability company (LLC), or C or S corporation. Any business interest expense that’s disallowed by this limitation is carried forward to future tax years. Business interest expense means interest on debt that’s allocable to a business. For partnerships, LLCs that are treated as partnerships for tax purposes, and S corporations, the limitation on the business interest expense deduction is applied first at the entity level and then at the owner level under complex rules. The limitation on the business interest expense deduction is applied before applying the passive activity loss (PAL) limitation rules, the at-risk limitation rules and the excess business loss disallowance rules. For pass-through entities, those rules are applied at the owner level. But the limitation on the business interest expense deduction is generally applied after other federal income tax provisions that disallow, defer or capitalize interest expense. The changes The OBBBA liberalizes the definition of ATI and expands what constitutes floor plan financing. For taxable years beginning in 2025 and beyond, the OBBBA calls for ATI to be computed before any deductions for depreciation, amortization or depletion. This change more closely aligns the definition of ATI to the financial accounting concept of earnings before interest, taxes, depreciation and amortization (EBITDA) and increases ATI, thus increasing allowable deductions for business interest expense. For taxable years beginning in 2025 and beyond, the OBBBA also expands the definition of floor plan financing to cover financing for trailers and campers that are designed to provide temporary living quarters for recreational, camping or seasonal use and that are designed to be towed by or affixed to a motor vehicle. For affected businesses, this change also increases allowable deductions for business interest expense. Exceptions to the rules There are several exceptions to the rules limiting the business interest expense deduction. First, there’s an exemption for businesses with average annual gross receipts for the three-tax-year period ending with the prior tax year that don’t exceed the inflation-adjusted threshold. For tax years beginning in 2025, the threshold is $31 million. For tax years beginning in 2026, the threshold is $32 million. The following businesses are also exempt: An electing real property business that agrees to depreciate certain real property assets over longer periods. An electing farming business that agrees to depreciate certain farming property assets over longer periods. Any business that furnishes the sale of electrical energy, water, sewage disposal services, gas or steam through a local distribution system, or transportation of gas or steam by pipeline, if the rates are established by a specified governing body. If you operate a real property or farming business and are considering electing out of the business interest expense deduction limitation, you must evaluate the trade-off between currently deducting more business interest expense and slower depreciation deductions. It’s complicated The rules limiting the business interest expense deduction are complicated. If your business may be affected, contact us. We can help assess the impact. © 2025 

As the year draws to a close, it’s a great time to revisit your gifting strategy — especially if you want to transfer wealth efficiently while minimizing future estate tax exposure. One of the simplest and most powerful tools available is the gift tax annual exclusion. In 2025, the exclusion amount is $19,000 per recipient. (The amount remains the same for 2026.) Be aware that you need to use your annual exclusion by December 31. The exclusion doesn’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add the unused 2025 exclusion to the 2026 exclusion to make a $38,000 tax-free gift to her next year. How can you leverage the annual exclusion? Making annual exclusion gifts is an easy way to reduce your potential estate tax liability. For example, let’s say that you have four adult children and eight grandchildren. In this instance, you may give each family member up to $19,000 tax-free by year end, for a total of $228,000 ($19,000 × 12). Furthermore, the gift tax annual exclusion is available to each taxpayer. If you’re married and your spouse consents to a joint gift, also called a “split gift,” the exclusion amount is effectively doubled to $38,000 per recipient for 2025 and 2026. Bear in mind that split gifts and large gifts trigger IRS reporting responsibilities. A gift tax return is required if you exceed the annual exclusion amount or you give joint gifts with your spouse. Unfortunately, you can’t file a “joint” gift tax return. In other words, each spouse must file an individual gift tax return for the year in which they both make gifts. Also, beware that some types of gifts aren’t eligible for the annual exclusion. For example, gifts must be of a “present interest” to qualify. What’s the lifetime gift tax exemption? If you make gifts in excess of the annual exclusion amount (or gifts ineligible for the exclusion), you can apply your lifetime gift and estate tax exemption. For 2025, the exemption is $13.99 million. The One Big Beautiful Bill Act permanently increases the exemption amount to $15 million beginning in 2026, indexing it for inflation after that. Note: Any gift tax exemption used during your lifetime reduces the estate tax exemption amount available at death. Are some gifts exempt from gift tax? Yes. These include gifts: From one spouse to the other (as long as the recipient spouse is a U.S. citizen), To a qualified charitable organization, Made directly to a health care provider for medical expenses, and Made directly to qualifying educational institution for a student’s tuition. For example, you might pay the tuition for a grandchild’s upcoming school year directly to the college. The gift won’t count against the annual exclusion or your lifetime exemption. Review your estate plan before making gifts If you’re considering year-end giving, it may be helpful to review your overall estate plan and determine how annual exclusion gifts can support your long-term goals. We can help you identify which assets to give, ensure proper documentation and integrate gifting into your broader wealth transfer strategy. © 2025 

Unanticipated crises can threaten even the most well-run company. And the risk is often greater for small to midsize businesses where the owner wears many hats. That’s why your company needs an emergency succession plan. Unlike a traditional succession plan — which focuses on the long-term and is certainly important, too — an emergency succession plan addresses who’d take the helm tomorrow if you’re suddenly unable to run the business. Its purpose is to clarify responsibilities, preserve operational continuity and reassure key stakeholders. Naming the right person When preparing for potential disasters in the past, you’ve probably been urged to devise contingency plans to stay operational. In the case of an emergency succession plan, you need to identify contingency people. Larger organizations may have an advantage here. After all, a CFO or COO may be able to temporarily or even permanently replace a CEO relatively easily. For small to midsize companies, the challenge can be greater — particularly if the owner is heavily involved in retaining key customers or bringing in new business. For this reason, an emergency succession plan should name someone who can credibly step into the leadership role if you become seriously ill or otherwise incapacitated. Look to a trusted individual whom you expect to retain long-term and who has the skills and personality to stabilize the company during a difficult time. After you identify this person, consider the “domino effect.” That is, who’ll take on your emergency successor’s role when that individual is busy running the company? Empowering your pick After choosing an emergency successor, meet with the person to discuss the role in depth. Listen to any concerns and take steps to alleviate them. For instance, you may need to train the individual on certain duties or allow the person to participate in executive-level decisions to get a feel for running the business. Just as important, ensure your emergency successor has the power and access to act quickly. This includes: Signatory authority for bank accounts, Access to accounting and payroll systems, and The ability to execute contracts and approve expenditures. Updating company governance documents to reflect temporary leadership authority is a key step. Be sure to ask your attorney for guidance. Centralizing key information It’s also critical to document the financial, operational and administrative information your emergency successor will rely on. This includes maintaining a secure, centralized location for key records such as: Banking credentials, Vendor and customer contracts, Payroll records and procedures, Human resources data, Tax filings and financial statements, and Login details for essential systems. Without this documentation, even the most capable interim leader may struggle to keep the business functioning smoothly. Also, ensure your successor will have access to insurance records. Review your coverage to verify it protects the company financially in the event of a sudden transition. Key person insurance, disability buyout policies, and the structure of ownership or buy-sell agreements should align with your emergency succession plan’s objectives. Getting the word out A traditional succession plan is usually kept close to the vest until it’s fully formulated and nearing execution. An emergency succession plan, however, must be transparent and communicated as soon as possible. When ready, inform your team about the plan and how it will affect everyone’s day-to-day duties if executed. In addition, develop a strategy for communicating with customers, vendors, lenders, investors and other stakeholders. Acting now If you haven’t created an emergency succession plan, year end may be a good time to get started. Already have one? Be sure to review it at least annually or whenever there are significant changes to the business. We’d be happy to help you evaluate areas of financial risk, better document internal controls and strengthen the processes that will keep your company moving forward — even in the face of the unexpected. © 2025