Five estate planning pitfalls auctioneers should keep an eye on

Reprinted from The Keystone Auctioneer, the official publication of the Pennsylvania Auctioneers Association (PAA). All rights reserved.

Though auctions and auctioneers are not necessarily synonymous with estate planning, you are routinely called on to value, organize, and sell a lifetime of assets, collections, or business holdings of a decedent. That makes you an essential part of the estate administration process, sometimes even before the client’s personal advisors are involved.

From the perspective of a business owner, estate planning is about more than dividing property. It’s about ensuring someone can manage the business if the owner dies or becomes incapacitated. Without proper documentation or designated successor decision-makers in place, operations can grind to a halt. Understanding how poor planning can unravel an estate can help you better serve your clients and protect your business. Here are five common estate planning pitfalls for business owners, and how recognizing them early can help you and your clients towards a smoother transition.

Durable powers of attorney

A Durable General Power of Attorney, also known as a Financial Power of Attorney (“POA”), allows a designated agent to make financial or operational decisions if the owner is incapacitated. Think of this like your second set of car keys; it’s always nice to have a spare in a time of need.

There are two types of POAs generally applicable to business owners:

• A General POA gives broad authority—suitable when the agent is a trusted spouse, family member, or close friend.
• A Limited or Business-Specific POA narrows that authority to business decisions—ideal when the agent is a co-owner, executive, or trusted manager, or when the agent under the General POA is not familiar with or prepared to manage the business.

Many business owners rely heavily on a single individual for key business decisions and transactions. If you became incapacitated or otherwise unable to perform these duties, who would act for you?

Without a properly executed POA or other legal authorization in place, your business operations could come to a sudden standstill. This can lead to costly interruptions, missed opportunities, and even long-term damage to the company’s reputation and financial health.

Establishing a clear succession and decision-making plan, such as designating a trusted agent through a General or Limited POA, ensures your business can continue to operate smoothly, even in your absence. Taking proactive steps today helps protect the enterprise you’ve built and provides peace of mind for you, your employees, and your clients.

Last will and testament – executor’s ability to manage business affairs

Even individuals who have a Last Will and Testament may overlook the Executor’s authority to manage business affairs. Your Will names your Executor, who is responsible for managing and distributing assets after death. But if the Executor lacks authority, experience, or clarity in the Will, confusion and disputes may follow.

Auctioneers and estate professionals frequently encounter these challenges firsthand. It’s not uncommon for heirs or Co-Executors to disagree over who controls company property, inventory, or accounts after an individual’s passing. If the Will doesn’t clearly authorize the Executor to sell, liquidate, or continue business operations, even routine transactions, such as paying bills, selling assets, or transferring ownership, can be delayed as the estate moves through the probate process. In some instances, it may be beneficial to have a “Special Business Executor” who has sole authority over the management of the business interests of an estate.

Backstop for key decision makers

Many small or closely held businesses operate lean from a managerial perspective, with one or a small handful of individuals handling nearly every aspect of management. The owner might serve simultaneously as President, Treasurer, and chief decision maker, signing checks, approving contracts, and directing daily operations. While this approach may work well on a day-to-day basis, it poses serious risks if that key person becomes unavailable due to illness, incapacity, or death.

Every business should have successor decision makers formally designated in its governing documents or by authorization or resolution of the Owner(s) or Directors/Managers/General Partner. This could mean, for example, appointing a Vice President authorized to act in the President’s absence or granting limited authority to a trusted manager for essential tasks. Without these roles clearly defined, a business can grind to a halt.

Taking the time to document and communicate a clear chain of command ensures that your business can continue operating smoothly, even in moments of uncertainty. It also reassures employees, partners, and customers that the company’s leadership is prepared for the unexpected.

Buy/sell agreements

For businesses with multiple owners, the absence of a Buy/Sell Agreement can create confusion and conflict when one owner dies, divorces, becomes disabled, or decides to retire. A well-crafted Buy/Sell Agreement establishes what will happen to that owner’s share of the business in any such event. Without a Buy/Sell Agreement in place, ownership may automatically pass to heirs, spouses, or creditors who have no interest, experience, or alignment with the business’s goals. This can lead to disagreements among remaining owners, management paralysis, or even forced liquidation to resolve competing claims.

Auctioneers often encounter these situations firsthand. When multiple parties claim authority to sell or control business property, it can delay the auction process, create legal exposure, and ultimately result in a lower auction sale price. A clearly defined Buy/Sell Agreement may not only prevent such disputes but can also provide financial stability and peace of mind. It allows owners to plan for transitions in a fair and predictable way, preserves business continuity, and protects the company’s long-term value—ensuring that when change happens, it does so smoothly and with minimal disruption.

Consolidation and coordination

Even when clients have core estate and succession planning documents, they sometimes fail to connect them into a cohesive plan. The result may include overlapping authority or conflicting instructions that delay business operations and estate administration matters or create general confusion.

For auctioneers, this situation might look familiar: a POA agent or Executor who is not educated on corporate affairs, a Will without specific Executor powers regarding business interests, or a lack of designated decision makers within the company. Each document may appear sound on its face, but together they can create confusion, delays, and any other complications you may think of.

The majority of this article can be summarized in three questions:

• Do I have mechanisms in place regarding the operations of my company if I am unable to act?
• Have I prepared any interim or permanent decision makers to manage the business without significant delay or interruption?
• If I am a co-owner of my business, are my governing documents clear on what happens to my (or my partner’s) business interest upon the occurrence of certain events (e.g., death, retirement, or court-ordered ownership transfers)?

You don’t need to be an estate planning attorney to recognize when your succession planning affairs may have gaps. By spotting potential pitfalls and self-assessing your succession and estate plan, you can help identify these issues and seek the right professional guidance and protect your interests.