There are some subjects people would rather avoid than address. One that can be fairly common amongst people is their own mortality.
Only 50 percent of Australian adults have a valid will. For some people it may be that they have not bothered to get around to doing one, others feel that they don’t have enough assets to warrant a will. A surprising amount of people though, and I have met many of them, don’t have a will because they believe that by creating a will they are tempting fate.
The statistics, however, speak for themselves: one out of one people will eventually die. For most people, the time and manner of their death is a mystery, so we need to protect ourselves against the unexpected.
Here are some tips for business owners:
Have you made a will?
There is an old but true saying, “Where there is a will there is a relative”. I have seen relatives come out of hiding over the years when they get sniff of an inheritance. A properly prepared will can go a long way towards ensuring that your assets are passed to those of your choosing, not the courts or according to other people’s desires, so do the paperwork and get a will made.
Where there are complications like previous marriages or complex business structures it is critical that you consult a well-qualified legal professional to get your affairs well prepared to avoid disputes after you have died. They can also advise you about tax effective structures that can be of benefit to those left behind.
Buy / sell agreement for your business
Buy-sell agreements are one of the most important, and yet often overlooked, agreements a business can have in place. It is wise that where more than one business owner is involved that a properly prepared buy-sell agreement is in place. This, in simple terms, is an agreement that specifies how the business will continue and how ownership will be transferred when a ‘trigger’ event occurs. Trigger events include the death, disability, retirement, divorce or bankruptcy of one of the business owners.
A correctly prepared buy-sell agreement will ensure that:
o the transition to new ownership will be smooth
o a predetermined mechanism is in place to set the purchase price
o the business won’t be subject to a fire sale and thereby risking a potential loss of money.
It is common that the purchase will need to be funded and, in the case of death or disability insurance policies, these can be structured in a tax effective way to provide this funding.
Do you need life insurance?
Here is a simple test to discover whether you need life insurance. If you have debts or dependants that will survive your death, then you need life insurance. Your dependants will no longer have the benefit of your income once you have died. Even if you have no dependants you do not want to leave debts behind for others to absorb.
A qualified insurance broker can analyse your circumstances and recommend how much insurance you should be carrying and how to best structure it. They can also research the insurance market to find you the best product at the best price.
In summary, taking a look at these issues and doing the work well in advance of your passing will make life for those you leave behind a lot less complex and fraught. It will also help ensure that everything you have worked for will be taken care of as you would have wished.
