Without an Estate Plan, you risk costly and unwanted emotional stress for your family and loved ones… Advivo shares six considerations to make sure all your personal, financial and business affairs are taken care of.
The idea of future-proofing your business is about doing work now to grow and protect your business to ensure that it will stand the test of time. At Advivo, we often talk about keeping the end in mind. You don’t know what life can throw your way, so effective and well advised Estate Planning ensures that your business is taken care of while reducing the emotional stress on your family and loved ones should something happen to key personnel.
This article on Estate Planning is the first in our series of Future-Proofing your Business; each following newsletter will include a different topic to help you grow and protect your business for the future. These topics will range from estate planning to succession planning, to digital transformation to innovation. You never know what the future will hold and what external forces can disrupt your business.
As a business owner, without an Estate Plan, you risk costly and unwanted emotional stress for your family and loved ones and an outcome for the business or family members that is not what you had intended or planned… Advivo shares six considerations to make sure all your personal, financial and business affairs are taken care of particularly when you consider for many business owners, their business is their most valuable asset and the key to a secure retirement or the family’s future prosperity.
Estate planning, as uncomfortable as the thought might seem, can offer peace of mind that your assets and possessions are distributed in the way you desire, and without anyone being able to successfully contest your wishes. Without a valid and well-considered estate plan, you risk costly and unwanted emotional stress for your family and the loved ones you leave behind. All your years of hard work may be lost and the business, in a damaged state, would just need to be sold.
Here is a simple list of questions to ask yourself when estate planning.
1. Do I have a Will and is my Will up-to-date?
Assuming you have a Will, then the obvious question to ask yourself is – is my Will up to date? It’s important to note anyone over the age of 18 with assets should have a will outlining who will receive their assets including property, possessions, cash in the bank, shares, car, jewellery etc. Small changes to a Will can be made with a codicil (an addition or supplement that explains, modifies, or revokes a Will or part of one) in the event of a change (marriage, divorce, children etc.).
A common misconception is that if you die without a Will your assets will automatically pass on to your partner. This is not necessarily the case, and it is dependent on circumstances and follows a prescribed formula.
Another common misconception is that your Will automatically includes your superannuation, it does not continue reading to see why.
If you have a business, have you considered how that business continues to operate if you are not here? Is there a skill gap in your absence? Does the business operate as a company and if so, are there other directors to make decisions and manage the company? Many businesses operate through complex structures of trusts and companies for a variety of reasons, does your Will accurately reflect these structures and your entitlements/shareholding or unit holding? Does the business rely on external finance from a bank that you have guaranteed and supported with your personal assets?
Are there other parties to consider in your estate and business structures such as partners or non-family business partners or financiers? Do you have shareholder’s agreements, buy-sell agreements and insurance to underwrite those agreements?
2. Have I assigned beneficiaries to my superannuation/ and insurance?
Your superannuation and insurance policies all let you designate beneficiaries to pass on your funds. If you haven’t done so already, you should set up a Death Nomination or Reversionary Beneficiary for your superannuation. Your super isn’t automatically paid to your estate to be distributed according to the instructions you leave in your will, but this document will make sure it ends up with the person/s of your choosing.
3. Have I designated legal guardians for my dependents?
If you have young children, this may be one of the most important considerations as you plan your estate. What will happen to your dependents? Do you have a plan in place for them? Do you have guardians who will care for them and fund their upbringing, education and other expenses?
To choose the best legal guardian to care for your child, you may wish to consider the following:
- Similarities between your lifestyle and values
- Any transition regarding location, your child/children will need to make
- Who can take on the role, financially, emotionally and physically
Once you have chosen a prospective guardian, it’s important to discuss your intentions, outline your expectations and obtain consent.
4. How will taxes affect my estate?
Although there is no inheritance tax in Australia that does not mean your beneficiaries will be able to avoid tax or duties on the funds or assets they receive. However, there are ways you can minimise this – for example, super fund benefits are tax-free if the inheritor is a Death Benefits Dependent (child under the age of 18, spouse, former spouse or an interdependent relation). Depending on whom you choose to assign as beneficiary, you could minimise additional tax. Accounting advice or a professional financial planner should be consulted on this.
5. Have I considered any involvement I have in companies or trusts?
Companies and Trusts continue to exist and the control, management and shareholding/beneficial rights to these should be considered and addressed as part of your estate plan. Getting this wrong could mean your family may lose control of what you consider to be your family business or even worse the business may fail due to legal or operational inadequacies in your absence. Accordingly, a continuing structure such as a company has many advantages over a sole trader in the event of death or disablement but multiple directors are needed.
6. Have I reviewed my estate planning with experts?
As your accountants and trusted business advisors, Advivo will understand and take care of your financial affairs, business structures and future aspirations. We’ll also drive your Estate Planning Strategy and coordinate the implementation with your other nominated advisors, such as lawyers who are needed to prepare the wills and other documentation as required. Our team will take the time to assist you and make sure you’re comfortable with every step of the process.
First, we’ll define your personal, financial and family positions, then clarify with you what your expectations are and how you would like to proceed and family objectives. Once we have solidified your anticipated outcome, the next step is to facilitate your estate plan so that your wishes can be eventually carried out. Advivo will work with your or our partner lawyers, insurance brokers, financial planners and others to ensure your objectives are understood, documented and implemented.
Advivo will work with you and your team to de-risk your business to be able to respond to the catastrophic loss or disablement of a business owner to ensure the business is sustainable in your absence and plans in place to respond. On your behalf, Advivo will also engage with legal professionals (either your existing trusted solicitor or an estate planning specialist lawyer that we can arrange) to provide the required legal services.
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