Estate planning and the business owner

By Clive Hill (Legal Adviser: Sanlam Trust)

As a business owner, time-management is your greatest challenge. You need to focus 100% on your business, but can’t afford to lose what you have worked so hard to build up. At the same time, you want to do what is best for your family and, at the same time, ensure that your business stays successful as you, your family and employees also rely on the income it generates.

Just like you are an expert in your field, you respect the value an estate planning expert can add to your financial planning. A few hours is all it takes for an estate planning expert to gain an understanding of your particular needs. This insight will enable him to give you sound advice which could secure your financial future.

Consider John Canoli. He is a successful franchise owner, focused on making his business a success. His business partner, a few years younger, is equally committed. But neither of them has stopped to think of the consequences if something happened to either or both of them. They are assuming that their wives would simply take over. With some good estate planning, they could ensure that the business is not left without hands-on management, that their Wills are up to date, and that there is enough cash to meet the costs of winding up their deceased estates. Their families will benefit from a well-considered estate plan, and their employees will be thankful that the business is able to continue to provide them with a livelihood.

As a business owner, you have to consider the following:

  • the cost to the business should the owner/s or any key staff member die or become disabled through accident or illness;
  • the effectiveness of the Last Will and Testament and the abilities of the executor;
  • the protective role a Trust offers in holding business and/or personal assets;
  • retirement from an active working life and investing over time to provide a private pension.

Another critical element to consider is this;: should you plan your estate separately for business needs and for family needs? The two are indeed very different. The area of business estate planning usually involves business assurance and buy-and-sell agreements. However, unless the business is owned entirely by a trust, the proceeds from business planning will usually impact the personal estate of the owner and therefore his family. Even with a trust structure in place, the family members are likely to be beneficiaries of that trust and therefore it should be taken into account when planning for their future financial needs. In other words, it is normally impossible to completely separate your business planning and your personal and family financial planning. An experienced estate planner will seek to tie up all loose ends, avoiding a situation where a contingent business liability ends up affecting the family finances.

So remember, it’s what you don’t know that is the most dangerous. Equip yourself with the tools needed to ensure adequate estate planning by speaking to your fiduciary specialist today.