Estate and Succession Planning for Business Owners

For many business owners their business is the major asset of the estate.

Yet surprisingly very few business owners have adequately initiated basic estate planning strategies.

Hence what follows is an overview of estate planning “basics” for business owners.

You Can’t Take it With You

If your business is a family business, chances are it is your main asset. This asset not only provides income and security .for you and your family while you are living, but potentially, also if you become ill, are injured or die. However, a business is not a straightforward, easily transferable asset like cash or property, so you need to do some careful planning.

Passing the Baton

Estate planning is one of the ways in which you can transfer the control, management and entitlements of your business. Whether your family opt to keep, sell or liquidate, a well-drafted estate plan will help prevent delays, retain the value of your business and offer your loved ones the brightest possible future. Failing to plan could see your legacy consumed by settlement costs, taxes and fees or worse – intestate disputes that tear your family apart.

The following provides an overview of estate planning as it applies to business ownership. Armed with this knowledge you should be able to formulate the right estate plan for your personal situation, avoid the common mistakes of business estate planning and guide your lawyer in drafting the appropriate Estate planning is subject to state legislation, (each state and territory do things slightly differently) so seek professional assistance to make sure your last Will and Testament is watertight.


  1. Keep the business going

Putting the right structures or person in to replace you will enable your business to operate without you and prevent a fire sale or forced liquidation. This may mean training key staff or family members to work in the business and ensuring the estate has enough liquidity to keep the business going.

  1. Preserve assets

One of the goals of estate planning is to preserve the value of your estate and non-estate assets to provide maximum benefit to your beneficiaries. This involves arranging structures and systems to protect your accumulated wealth from unnecessary delays, taxes, liabilities, disputes and costs.

  1. Plan the strategy

Having a plan already in place will make the process easier for your family. Calculate ahead of time whether keeping, selling, or closing your business would be the best option for your family. The goal is to maximise the value of your estate and non-estate assets, including the business, while taking your existing responsibilities to your beneficiaries into account.

  1. Transfer the business

Your plan should indicate whether you want your business transferred to family members when you die, sold at full or less than full value, or liquidated for maximum value.

  1. Manage the estate

Appoint a manager you have confidence in – someone who will make sure your plan is followed through to completion and who will maintain or sell your business and distribute the asset competently. This means appointing a trusted executor. It will probably also involve training key staff members to run the business after you are gone.

Getting your estate plan right will enable the wealth of your estate and non-estate assets (such as your business) to be preserved and handed on. Failing to address these areas will invite unnecessary costs, capital losses and conflict.

Common Errors (and how to avoid them)


Documents (including digital documents held in the cloud) relating to your estate and non-estate assets and liabilities are difficult to find. This will result in delays settling your estate and your assets might lose value.

Avoid this mistake by: storing all your documents in one safe location and ensuring your executor knows where to find them and has access to them.


Assets are held in the wrong asset structure. For example, let’s say you want your business premises to transfer to your children by a first marriage. If your business premises are owned by you and your current spouse as joint tenants, they must pass directly to your spouse and bypass any arrangements you may have made for the children of your first marriage.

Avoid this mistake by: understanding how all your estate and non-estate assets are titled and correctly documenting and recording them. Check the title on all of your personal and business assets and reconcile them correctly in your Will.


There is not enough cash on hand to keep your business running while your estate is being settled, meaning it may have to be sold at a fire-sale. Assets have been incorrectly valued, creating unnecessary CGT obligations, making them costly to transfer.

Avoid this mistake by: ensuring beneficiaries have adequate cash to cover the time it will takes to execute your Will and if required, find the right buyer for your business.


You choose the wrong succession strategy which quickly devalues your business and your estate. A simple ‘I love you’ Will that leaves the business (and its problems) to a surviving spouse is sometimes more trouble than it’s worth. If your beneficiaries don’t have the skills to run the business without you (and you haven’t left clear directives) the business will probably end up being sold to meet the liabilities of your estate.

Avoid this mistake by: being realistic about the future of your business and the skills it would take to run or sell it and plan accordingly.


You choose the wrong executor and give the executor no power to keep the business going. Not indemnifying the executor could result in forced closure of the business at substantial less value.

Avoid this mistake by: choosing an executor or trustee with the skills and process to carry out your wishes. This may involve finding someone who could continue to run the business to generate wealth for your family or someone with the skills and connections to sell or liquidate the business effectively.


There is no buy/sell agreement, or the agreement is poorly drafted. Without a good buy/sell agreement there is no guarantee that the people you want to inherit will actually receive your business, or proceeds from the sale of your business. In the absence of a good agreement, the business will remain an asset to be disposed of by the executor making it unlikely to achieve its full value.

Avoid this mistake by: structuring your Will to ensure that business succession or business buy/sell arrangements are in line with all ancillary documents.


You have Will trust provisions drafted without thinking through the effect on future trustees; with wide powers of investment clauses result in costly changes. Will trusts are established to delay or manage assets on behalf of minors or beneficiaries with special needs, so they need to be carefully thought through.

Avoid this mistake by: correctly drafting Will trusts to specially cater for the special needs and objectives of the beneficiary. Appoint a trustee with the necessary skills and powers to meet the requirements of your beneficiaries as outlined in your Will.


You don’t leave any grounds for your beneficiaries to challenge your Will, meaning they are stuck with what you decided.

There are seven grounds on which a Will may be challenged:

  • Improper execution: an essential requirement of the Will is missing
  • Incompetence: the testator (you) did not have capacity to make a Will
  • Duress: the testator was under duress or unduly influenced by another to make the Will
  • Fraud: the testator was defrauded into making a Will by misleading or deceptive activity
  • Forgery: The Will is not the true Will or the signature is not the testator’s signature
  • Revocation: Someone claims the Will had been revoked by the testator before death
  • Eligible dependency: A dependant may make a claim if not named as beneficiary in the Will or for inadequate benefit under a Will.

Avoid this mistake by: seeking professional assistance in the drafting and execution of your Will and ensuring your dependants are adequately catered for.


Beneficiaries who are active in the business and those who are not active will have different interests and expectations. So, leaving an equal interest in your business to each of your children (regardless of their involvement) is likely to cause problems. Those who don’t work in the business may want to derive value from the business by selling their interest in it or pressing for income entitlements. This could lead to conflict with the children who would prefer to retain earnings in the business to help it grow. If one party offers to buy the other out, disagreements can then arise over what constitutes ‘fair’ value. The only recourse may be to sell the business.

Avoid this mistake by: communicating openly with all beneficiaries – those who are engaged in the business and those who are not. For children who are not involved in the business, it may be worthwhile bequeathing other assets or stipulating clear terms by which they may dispose of their share in your business.


You draft your Will – then set and forget. Some things do not get better with age. Wills that are drafted and then forgotten can lead to estate shrinkage through the unintended sale of assets and administrative costs. This can mean your business is sold at a depreciated value to raise cash to meet wishes that are well out of date.

Avoid this mistake by: Regularly reviewing and updating your Will.

Wills Dispute and Estate Planning Lawyers at Pavuk Legal can assist with Estate and Succession Planning for Business Owners and many other legal aspects.

Many other essential hot topics for business owners is all found in the book Nobody Else’s Business. Nobody Else’s Business is about helping business owners live the life they want to live, now and in the future. It is the ultimate guidebook for succession planning of modern Australian businesses.

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