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Estate planning for small business

Are you the owner of a small business and/or have equitable interests in a business or company? Have you made provisions in your will for the administration of your business? Your Estate planning should be aligned with your business succession arrangements to ensure that all you have worked so hard for is protected and your beneficiaries receive all that you intended.

So what are your options?

A Buy/Sell Agreement
A mechanism that can work with your will is a ‘Buy/Sell Agreement’. This agreement sets out the terms under which those who operate or may have a beneficial interest your business, are able to buy out partners or other shareholders. This is a favourable option for family businesses involving siblings. Much heartache and stress can be avoided by pre-agreed terms that are rationally considered well before the passing of a parent. For example, a mother may give her share in a company to the father – her husband – via her will and their children would likely inherit this share equally upon dad’s death. A Buy/Sell Agreement would provide certainty for the siblings to negotiate circumstances such as options to buy/sell, periodic payment arrangements and the meeting of capital gains tax liabilities. Without an agreement, children of the deceased have the dual burden of grieving for a loved one and trying to agree on the future of the business.

Testamentary Discretionary Trusts
If you are leaving equity in a business to children who are in high risk occupations, i.e. at risk of being sued in their professional capacities, a Testamentary Trust can afford some protection for the assets of your deceased estate. A beneficiary of a trust does not have proprietary rights in the assets of a trust, therefore a trustee in bankruptcy proceedings generally cannot access the assets for creditors. There are also significant tax advantages for your beneficiaries in establishing a testamentary trust, the nature of which can be explained to you by your lawyer, accountant and/or financial adviser.

It is essential to remember that your business interests and your personal property interests should be considered together in your estate planning. Your trusted law firm can support you in making sense of your estate plan and explain the likely impact and effect of your testamentary intentions.

To find out more on how you can include your business interests in your estate plan, contact us for a confidential chat.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation. 

Published Jul 9, 2018