Business Succession and Estate Planning – Why It Matters For You

If you’re an Australian business owner, you know all about hard work. Some 60% of Australian SMEs and start-ups fail within their first three years. So, if you’ve made it past that point and built a successful business, you don’t want to let all that blood, sweat and tears go to waste. Unfortunately, without the right succession and estate planning, that risk is very real. 

As financial advisors in Melbourne, Acton Wealth’s expertise is invaluable in helping SME clients understand that business succession and estate planning is a form of wealth management. Indeed, this could well be your most valuable life asset, and it’s important to treat it as such. 

Here, we share information about estate and succession planning, what can go wrong if you don’t have either in place, and how we can assist. If you think your business is unprepared and vulnerable, contact our team today. We’re here to help you not only build your wealth but safeguard it. 

What is Estate Planning For Business, And How Does It Differ to a Succession Plan?  

Estate planning for a business involves preparing and formalising the distribution of business assets in the event of the owner’s death. This is not as straightforward as it may sound (and we will get to that!) as the business and business owner can be two very distinct entities. An estate plan ensures that, in the event of an owner’s death, their assets are distributed as per their wishes. 

A succession plan focuses on continuing the business after the owner’s death. It ensures a smooth transition of ownership and management, preserving the business’s continuity and safeguarding its future. This process addresses the legal, financial, and operational aspects necessary to maintain stability and protect stakeholders’ interests. 

A Will must be planned while the business owner is alive. However, obviously, it can only come into effect upon their death. In contrast, succession planning can be executed while the owner is still alive (and might, for example, facilitate retirement or help deal with an unexpected illness).  

What Are Buy/Sell Agreements? 

Often referred to as a “business Will,” a buy and sell agreement is essential for businesses with multiple owners. 

This legally binding contract is triggered by life events such as retirement, divorce, or death, compelling one owner to sell their share. The agreement ensures that the remaining owners can continue to control and run the business by providing the necessary lump sum for the buyout.

Our financial advisors in Melbourne specialise in supporting self-employed clients. We work to thoroughly understand the client’s business structure and provide insurance advice based on bespoke research. We recommend policies that incorporate buy/sell agreement scenarios to ensure seamless transitions and financial security for our clients and their next-of-kin.

No Succession Plan – What Can Go Wrong?  

The answer in one word is; Everything. 

The biggest mistake people make is assuming that when a business owner passes, the business assets can be automatically and seamlessly dispersed among next of kin. Not so. In most cases, the business owns the assets, not the individual. And if there is more than one owner, there are additional complexities, as we’ve already touched on. This is where things can become very complicated and stressful.

If you own a business and you’ve purchased office space, vehicles, shares, etc. through the company, you don’t own them; the business does. This means that when you die unless you have a formal succession plan in place (and a buy/sell agreement), your personal Will has no power over your business assets.  

If you don’t make the necessary arrangements whilst you’re alive, chances are you will unintentionally drop your loved ones into a minefield. That’s where we can help—now. 

What You Gain From Succession Planning

As with a Will, the number one benefit of succession planning is knowing your wishes will be fulfilled and the people you love will be cared for. Moreover, you have peace of mind that the business you’ve worked so hard to build will be managed in line with your vision. 

Australian law dictates that, in the event of your death, your company’s assets will pass to people you nominate or appoint. However, you need to have made the appointments official whilst you’re still alive. Typically, these next-of-kin will be formally made a Director, Shareholder, Trustee, Corporate Trustee or Appointer. 

Importantly, if any asset ownership is shared, it cannot be distributed by one owner’s Will.  

Succession and Estate Planning – How Our Financial Advisors Can Help

ActOn Wealth’s passion lies in growing and protecting your wealth. A critical part of this is ensuring that your Will and succession plans are carefully crafted and integrated into your financial plan. While we are not lawyers and cannot draw up Wills and agreements (although we can recommend trusted professionals to do so), we can certainly advise on their financial elements. 

When developing your bespoke financial strategy, we will:

• Review Your Business Structure: Understand the distinction between your personal and company-owned assets.
• Examine Trust Deeds and Legal Documents: Clearly outline the fate of entities and assets in the event of your death.
• Assess Shareholder or Buy/Sell Agreements: Ensure these agreements are aligned with your succession planning goals.

What Businesses Can We Help With Estate and Succession Planning? 

Whatever type of SME you own, we can assist. This includes:

• Start-ups 
• Sole traders 
• Franchises 
• Agribusiness 
• Family businesses 

Contact Us About Succession and Estate Planning in Australia   

If you’re keen to align your financial plan with your business succession plan and Will, contact our wealth financial advisors today. We’re here to make the process holistic, straightforward and water-tight. 

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