Contents
Introduction
If you had an insight into the future, how would you ensure that your business continued if you passed away? Who would need to be hired to take your place if you were suddenly incapacitated? How would you ensure that any dependants were properly safeguarded?
For business owners, there are three key strategies that can be used to ensure that business assets are protected and accumulated wealth is transferred to the next generation. These strategies include buy-sell agreements, intergenerational wealth transfers, and regular reviews.
Buy-Sell Agreements
Buy-sell agreements are agreements that are made now between business owners whether they be partners, shareholders or unit holders. The agreement is a critical document which sets out how ownership is transferred and how control of a jointly held asset happens in certain events.
The key benefit of a buy sell agreement is that it ensures a smooth passing of control on the death or incapacity of a business owner. When coupled with financial planning advice and adequate insurance coverage, business transition can occur without any stress to surviving family members.
Buy-sell agreements minimise the chances of conflicts with other business owners as they ensure that a business value is included for buyouts well before a partner is exiting the business. This not only reduces conflict but ensures a faster transition time.
Intergenerational Wealth Transfer
Where a business interest is transferred directly to a beneficiary, that asset is immediately open to claims by third parties if there is a relationship change or creditor claim. The effective use of a testamentary trust means that assets held in that trust are not automatically personal property and can in certain circumstances be protected from ex-spouse claims and creditor claims.
Regular Reviews
In our experience, we see how important it is that succession plans are regularly updated. Circumstances changes and the value of a business can change from year to year. We recommend reviewing your succession plan at least annually to make sure it reflects your intentions and your key worth.
Annual reviews also make sure that any other documents such as powers of attorney (both for the business owner and any companies) are up to date and give the attorney all the powers they need to be effective when the need arises.
Getting the Right Advice
We have helped many clients with complex business and family arrangements develop a succession plan that supports their needs. Getting the right legal advice is often the best way to ensure that you can ensure your family is protected well into the future.
Need More Information? Contact Us!
It’s always a good idea to seek professional advice when dealing with legal matters.
If you have concerns about how to best protect your business assets, please do not hesitate to contact Victoria on (02) 4288 0150 or admin@pdclaw.au today!
Victoria advises on a wide range of property and commercial matters, including contract negotiations and real estate transactions. She has a passion for assisting clients in understanding complex legal issues so that they can successfully achieve their business goals.
