01 June 2021
If you thought making a Will meant you’d ticked estate planning off your to-do list, you might be surprised to find there’s a bit more to it if you’re a business owner.
Firstly, congratulations if you have made a Will. According to the Public Trustee of WA, almost half of Western Australians over the age of 30 haven’t.
What is a Will? As the best-known component of estate planning, a Will is a formal legal document that details how you want your assets distributed when you die. Ideally in the most efficient and tax-effective manner.
I’m a business owner. What else does estate planning involve?
Estate planning is an opportunity to think about what you want to happen to your assets – including your business – after you die.
Will you want the business to continue after you’ve gone? Or will it be wound up? How will the business’s assets be distributed? And who would take over the running of the business should the unthinkable happen and you die suddenly?
Surprisingly, many business owners don’t take the time to consider how one of their biggest assets – their business – will be dealt when they’re no longer here, or if life events such as divorce or sickness come into play for that matter.
According to Bstar’s 2020/21 SME Research Report, only 43% of business owners surveyed had made personal, family and business arrangements for asset protection and estate planning from common trigger events, such as death, ill health, business disputes and relationship breakdowns.
Concerns included keeping the business going to pass onto the next generation, who may not want to take it on, and identifying potential partners or opportunities with growth and maximum value in mind. All issues your Business Advisor can help with.
While estate planning can be emotionally demanding and potentially complex, it can also bring great peace of mind.
Why involve your Business Advisor in your estate planning?
Your Business Advisor can take a holistic approach to your situation, considering both business and family factors when it comes to your assets, especially your business.
While your lawyer can document your final wishes, your Business Advisor can help examine your assets and how you want them distributed when you die. They can also help you maximise the value of your estate through tax planning to minimise capital gains and income tax payable by your beneficiaries.
What about my Super?
Superannuation does not automatically form part of your assets. It’s therefore critical to get advice on this aspect of estate planning to ensure the money ends up in the hands of the people it was intended for.
What else do I need to think about?
As a business owner, it’s advisable to review your Will every three years to take into account any life changes, such as getting married, having children or starting a new business. Other aspects of estate planning include appointing a Power of Attorney; someone you trust to represent you or act on your behalf in financial matters if you lose mental capacity.
Your Business Advisor can work with you to determine who is the best fit for this role, whether through a General Power of Attorney or an Enduring Power of Attorney.
What if the unthinkable happens?
If you are carrying on a business, whether as a sole trader, partnership or through a company, it makes sense to think about how you would like these interests dealt with, should you die suddenly.
If you’re a sole trader, you may want to include terms in your Will for the continuation of the business by your partner, children, friend or trustee. If you conduct the business as a sole director through a corporate entity, you will need to consider who will take your place as shareholder and managing director. Alternatively you may wish for the business to be wound up.
Some partnerships will have buy-sell insurance in place. This is a policy allowing the surviving business partner to acquire the deceased partner’s share so the business can continue. Generally, the surviving partner or partners receive lump sum funding to purchase the deceased partner’s share from the estate.
Business succession planning requires consideration of the intended beneficiaries and whether they have the desire, skill and competence to continue managing the business.
Here to help
Have questions about estate planning and maximising the value of your estate? Get in touch to find out how we can help.