Thinking SMART Thinking Ahead!
What This Article is About: This article draws on the importance of estate and business planning. In particular, this article discusses a typical estate plan and the consequences of not having one. Further, particular attention is given to the significance of strategic business succession.
In today's business world, the importance of estate and succession planning is a growing phenomenon. While many Australians have acknowledged the importance of estate planning, equal significance has not yet been afforded to business succession planning. By investing the time now and implementing an estate and succession plan, you and your loved ones could save thousands of dollars!
The contemplation of one’s own morality may seem daunting and intimidating, but it is absolutely necessary to organise your own financial and personal affairs to ensure for the welfare of your family members and enable your estate to be distributed according to your wishes upon your demise.
An estate plan is essentially a written expression of how you want your assets to be retained, managed and preserved during your lifetime and further how you want them to be disposed upon your death.
The consequences of not having an estate plan can be devastating. In essence, if a provision is not made for the distribution of your assets before your demise, your estate will be distributed according to an intestacy formula as established by respective State legislation. By investing the time now to plan your estate and seek legal advice, you can eliminate or reduce the potential burden of court fees and taxes later on.
A typical estate plan generally consists of: a Will or Testamentary Trust; an Enduring Power of Attorney ('EPOA'); and an Advanced Health Directive.
A Will is a legal document that allows an individual or what is termed a "testator" to outline how they would like their assets distributed upon their death, select beneficiaries, establish the times at which the beneficiaries will receive the assets and appoint a person/people responsible for the administration and distribution of the estate. There are a number of consequences that may be faced by your loved ones in the absence of a will, such as relying upon the laws of "intestacy". The pacts of relying on the rules of intestacy may mean, the distribution of assets may be passed to people you had not wished to inherit, leave incapacitated family members without adequate support. Ultimately if no one is entitled under the rules even the government may end up with your assets.
Similarly, an EPOA is a legal document that appoints a person you would like to manage your affairs for financial and or Health matters and is often utilised if you lose the capacity to make decisions. An attorney can manage your financial matters, personal and health matters. The benefit of appointing an attorney is that you attorney will be the sole person able to act and no application to the QCAT for a guardianship order will be required in the event of disagreements between those who seek to act informally.
A testamentary trust is generally established by a Will and will become operative on the death of a testator. A testamentary trust is a trust whereby a named person holds property for the benefit of another. There are a number of testamentary trusts, which include but are not limited to: life interests trusts or capital protected trusts; minors' trusts; special purpose trusts; educational trusts; and charitable trusts. There are a number of benefits that arise from placing your assets within trust including asset protection and tax incentives.
An advanced health directive allows you to indicate how you want medical decisions to be made in the event you have a terminal or incurable disease or illness in so much as it allows you to stop any treatment which may prolong your life. Not only does it provide peace of mind for you and your family, but it also ensures that you receive the care you want.
Business Succession Planning
While estate planning involves the decision of how property should be distributed, business succession is of extreme and independent importance as it focuses on planning the form, operational and ownership of an organisation with the view of long-term success.
Succession planning is of growing importance in the business world. While succession planning especially for small-medium businesses can be an unpleasant challenge, effective succession planning is a great opportunity to maximise business opportunities and create and systematic multi-generational business that guarantees leadership continuity. Succession planning is a systematic process that provides objective and indispensable planning to help make important succession decisions and prevent costly errors in the future.
It is true, early succession planning ensures a suitable supply of candidates for current and future leadership roles and enables the company to prepare and manage candidate's careers to optimise both the organisational and individual needs.
There are a number of key advantages related to employees that stretch beyond ensuring long-term achievement. Accordingly, as succession planning aims to train and develop specific candidates, it can improve efficiency by minimising employee turnover and improving morale.
Not only will succession planning make way for a more valuable and attractable business to clientele, it also offers financial security in retirement and can provide security to family members in the event of premature death.
"For more information and advice about this topic, please call our office to speak with one of our experts in this area".
By Shanan John Ramsden Lawyer and Managing Partner of Ramsden Lawyers.
1 Aug 2012