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My Will is My Business – the Essential Connection
Wednesday, January 20th, 2016

This one (2)

By Laura Di Cristofaro, Solicitor at Bowen Buchbinder Vilensky Lawyers

20 January 2016

We are constantly reminded of the importance of having a Will. The reality is, no adult is too young to make a Will and we must all confront our reluctance to plan for our succession.  Whilst the majority of us want to ensure that we provide security to our loved ones and our own legacy, many of us put executing a Will in our bucket list and never get around to actually doing anything about it.

So, what happens if you never execute a Will? Well, there are risks…

The most obvious risk is the complete loss of control of the distribution of your estate. If you die intestate, your estate is distributed in accordance with State Government Legislation. This means that your wishes or intentions have no relevance – the laws of intestacy dictate who gets your estate. Not only do you not have a say in who receives your estate, but you also lose control of imposing terms and conditions, such as age restrictions for beneficiaries to control their inheritance, implementing testamentary or special disability trusts or considering a fair and reasonable distribution between beneficiaries.

Without carefully addressing your Estate Planning, you also do not have a chance to properly consider binding death benefit nominations for your superannuation, Enduring Powers of Attorney for your financial affairs or Enduring Powers of Guardianship for your health and lifestyle needs.

Dying intestate may also instigate family disharmony and hardship, as your loved ones try to navigate through administering an intestate estate, or even may have to deal with a Family Provision Act claim being brought by a person seeking a portion (or a bigger portion) of your estate.

Beyond considering your personal estate is the need to consider any assets that your business entities may own.  There is a wide misunderstanding about who owns assets that form part of any business entity.   If you operate as a sole trader, the assets that you have to operate your business form part of your personal assets and accordingly form part of your estate. On the other hand, assets owned by a trust, partnership or company belong to those separate legal entities and not to you personally.

The question then is, how do you ensure that your loved ones benefit from your business assets? Those persons in control of your business entity decide how the assets are dealt with – it is therefore important to pass control of these entities to the right people, so that your intended beneficiaries eventually do receive the benefit of those assets.  This entails giving careful consideration to such mechanisms as gifting shares in a company, or giving units in a unit Trust, to your intended beneficiary, or appointing that beneficiary as the successive appointor of your family Trust.  If you die intestate and do not give thought to whom you will pass control of these entities, you may leave your business (and possibly your family’s source of income) floundering and miss opportunities to benefit your loved ones in the future.

As a shareholder of a company with multiple shareholders, it is vital to remember that if one of your fellow shareholders passes away and you or the remaining shareholders haven’t addressed a succession plan for the company then you could end up being in a business relationship with to whomever the deceased left his or her shares.  This may be his or her spouse, children or even someone entirely different. This can lead to significant disharmony and in turn could also lead to the company suffering severe financial and other prejudice because of a lack of proper management.  By implementing a Business Succession Agreement and the right insurances, one is able to ensure that they know exactly who they will be doing business with in the future and ensure the positive ongoing operation of the company and its officers.  Business owners are also able to execute documents such as Shareholder Agreements, so that they can monitor who may become a shareholder and thus avoid becoming involved in a business with someone with whom they would rather not be so engaged. By considering these matters during your lifetime and by properly planning your estate objectives you will ensure the success of protecting your business and any investments.

Estate Planning goes hand in hand with good business planning.

For more information or to discuss your Will and Estate Planning objectives and needs, please feel free to contact Laura Di Cristofaro at ldicristofaro@bbvlegal.com.au.

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