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Have you ever considered what would happen to your business if you were to die unexpectedly? Or if you were to become incapacitated and no longer able to run your business? Could your business continue to operate?
A well thought out estate and business succession plan is fundamental in protecting the wealth of your business and your family’s future. Careful planning can minimise the risk of problems with the running of your business and can help execute your wishes.
so why do you need a will?
A Will allows you to leave behind a structure that looks after those you leave behind now and into the future, including:
o Protecting the proceeds of your estate from creditors;
o Holding gifts on trust until your beneficiaries reach a certain age;
o Looking after beneficiaries who cannot manage their own affairs (e.g. due to illness or incapacity);
o Properly dealing with any companies and/or trusts that you control; and
o Leaving behind a tax effective structure that could significantly assist your survivors.
In particular with business owners, a Will enables you to ensure your wishes are followed when it comes to who will administer your estate (called your executor) and who will assume control and the running of your business.
Without a valid Will, the implementation of these agreed terms will be more difficult (or potentially compromised). This is why a well thought out business succession plan goes hand in hand with your estate plan.
Even if you are not in business with others, it may be that your business is owned by a company or trust and you may need to include how control of this company or trust will pass to your beneficiaries following your death.
An often over-looked scenario for business owners is what would happen in the event of their incapacity. If you are the Director of a company or a sole trader and you become incapacitated without the appropriate documents in place, another party may not be able to step in during your incapacity or have the authority to deal with your business.
In this situation, a Power of Attorney can be prepared which allows you to appoint someone known as an “Attorney” to deal with your financial, legal and business affairs. The Power of Attorney operates only when you are alive and dies with you.
assets outside your estate
It is worth mentioning that certain types of assets do not ordinarily form part of your estate and therefore cannot be dealt with by a Will. These include jointly held assets and superannuation. The interaction of these non-estate assets with your business and how these assets will be treated on your death, forms an integral part of an effective estate plan.
summary
Estate planning requires detailed review and discussion of your family structure, your estate and non-estate assets, your business structure, your assets and liabilities and any superannuation, life insurance and income protection policies you hold.
Estate and succession planning for business owners is an integral part of our wills and estate planning practice at Lynch Meyer. Our experienced team can provide detailed advice on any estate and business succession planning matter.
We offer all Master Plumbers Association members a FREE telephone legal hotline for advice.
why is business succession important?
Understanding how your particular business structure is controlled and how that control is passed is critical and will determine how your business can be transferred to a beneficiary via a Will. This will allow your business succession plan to be specifically tailored to your unique family situation, your wishes, your assets and the tax implications that can arise when passing wealth from one generation to the next.
A key concern for many families when preparing their Will is how they might ensure the needs of their family. Many business owners who come to us for their estate planning have thought little (if at all) about what might happen to their business should they die unexpectedly or become incapacitated.
For instance, many business owners appoint their spouse or children as the executor of their estate without adequately considering whether they are the best person to run the business in the immediate period following their death.
If you are in business with other people, it is highly likely that your business relationship documents will specify what is to occur in the event that you (or your business partner) were to die.
Anna Berrryman
Senior Associate
Lynch Meyer Lawyers
Ph: 8236 7622
Email: aberryman@lynchmeyer.com.au
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ESTATE PLANNING FOR BUSINESS OWNERS