Wills - what implications do they have for your business?

Small Biz Matters – a half hour program each week where you can work ON your business rather than IN it.
with Alexi Boyd from Boyd Office Management Services
Date: 9 April 2019

When medical, legal and government combine…. it’s a powder keg of compliance and red tape. So it’s a great time to call in the experts… your legal team. Every business should have one and today's subject reminds us why it’s so important to engage with a great solicitor who can help across a number of legal battlegrounds.

The issue of Wills is not something we often think of as small businesses but there’s a surprising number of ways NOT having a legal will can affect your business. From a direct impact on partnerships where one side is incapacitated, to the affect on your key stakeholder relationships and of course, family finance - which is ALWAYS wrapped up in small business topics.

So why should small businesses pay attention to wills? Today’s expert is David Peaston from Peaston Legal who’s passionate about empowering small businesses with great legal education and it was HE who suggested we tackle this topic.

Any legal information given in this program is general in nature and cannot be relied on by listeners as legal advice. You are advised to take your own legal advice in relation to your own circumstances.

Welcome to the show David.

Wills

1. Wills - what does a will do and what are the important roles to consider?
2. A Will - controls what happens to your estate when you die.

Your executor is entrusted with the administration of your estate when you die.

Most important role:

• Executor or executors
  • Spouse?
  • Trusted adviser?
  • More than one executor?
  • Adult children? (Not under 18)
  • Need back-up person or persons.
• Job can continue for years
• Physical location for practical reasons.

1. What should a small business person think about in particular in their Will?
2. Company or family trust?

• Control critical
• Shares to someone who can carry on the business if necessary
• Companies and trusts don’t die when you do
• Executor may need business skills.

1. What happens if I don’t have a will?
2. That is a situation called “intestacy”.

• State gets to choose
• Unexpected outcomes - blended families
• Cost and delay - especially for small business.

1. Is there anything I should avoid with my will?
2. Home made wills

• Litigation lawyers love them.

Enduring  Power of Attorney

1. What does a power of attorney do and why is it called “enduring”?
2. Financial affairs.

• Don’t confuse with USA
• Enduring

1. When does an enduring power of attorney end?
2. It ends when you die. That’s when your will takes over.
3. What are my “financial affairs?
4. Bank account

• Credit card
• Buy and sell shares
• House
• Business property

1. Why should a small business person have an enduring power of attorney?
2. There are a variety of circumstances such as:
   • Elderly
   • On holiday
   • In surgery

1. Should the power of attorney be limited? What if I only wanted my attorney to run the business while I’m on holidays?

1. Example of when David had the business.

Possible limitations:

• Time
• Business
• Property
• Medical
• Anything

1. Can an attorney step in for me as a director of a small business?

• Not automatic director
• Can vote shares
• Alternate director possible
• Check the constitution
• Take legal advice

Appointment of Enduring Guardian

1. What does a guardian do and why is it called “enduring”?
2. Health, living, “lifestyle”
3. When does does that appointment become effective?
4. Mental capacity
5. What sort of things might a guardian have to do?
6. Where you live

• Medical
• Dental
• Personal services

1. How do you know when someone loses mental capacity?
2. Obvious - coma, unconscious

• More difficult - delusional with periods of lucidity.
• Well known medical tests
• Doctor or doctors
• Hot issue in the law - ageing population
• Can’t do a will, EPOA or AEG (and can’t revoke)
• Don’t delay

1. Can my guardian instruct the doctors to stop treating me if there’s no hope - a “do not resuscitate” clause?
2. Often in guardianship documents for my clients

• May not be binding
  • Religious
  • Ethical
  • Professional liability
  • Criminal
  • Seek legal advice
• Clear indication to family and medical practitioners and should be given serious consideration.

Executors, Attorneys, Guardians

1. what should I consider when selecting people to undertake these roles for me? What should I consider if I am asked to take on such a role for someone else?
2. Consent and trust

• Skills required
• Time (length of job)
• Time (involvement) Reasonable?
• Too late to change if you lose capacity or die

1. Any particular issues for a small business person in accepting such a role?
2. All of the above

• Time poor
• Work committments
• Responsibility
• Don’t accept if can’t do it

Self managed Super Funds

Your “Big 3” could become the “Big 4”.

For a lot of people including small business people superannuation is becoming a substantial part of their assets. So ensuring that your wishes concerning your superannuation death benefits are respected is of considerable importance.

1. Is superannuation controlled by your will?
2. Trust deed
3. What happens to superannuation in your self managed super fund when you die?
4. Terms of a trust deed (often called “rules”).
5. To whom can superannuation death benefits be paid?
6. Dependants

• Spouse
• Children
• OR Estate.

1. What should a small business person with a self managed super fund be aware of?
2. Most important - Control

• Trust deed may not provide mechanism
• Amend trust deed
• Legal advice
• Katz v Grossman

1. What should people check in relation to their self managed super funds?
2. Who has the power to appoint the trustee;

Powers of the trustee

Binding death benefit nomination?

Take legal advice

1. The small business owner will often be the trustee of their self managed super fund. What happens if they lose capacity through illness or injury?
2. Ineligible to be trustee

• Power of Attorney
• Consider limitations in POA

Life Insurance

Maybe your “Big 4” just became the “Big 5”

1. Why should a small business person consider life insurance?
2. Two questions:

• Family if I die or suffer a life changing event like a total and permanent incapacity?
• Business if I die or suffer a life changing event like a total and permanent incapacity?
• Family
  • Mortgage
  • Fund to “tide over”
• Business
  • Buy/sell
  • Debt
  • Is money available?

1. Are there any issues to be aware of?

1. Like superannuation life insurance does not automatically fall under your will.

• Check policy re beneficiaries

Other considerations for small business people

1. In addition to setting up a Will, and Enduring Power of Attorney what other things should I be considering?
2. Plan for death or disability

• Will the business continue?
• Do you have a spouse or partners or children to carry on?
• How is the business owned?
• What assets does the business have?
• What about partners/shareholders
• Buy sell price?
• Where will the money come from?
• Insurance?

If you have not thought those questions through an ideal time is when you make your Will.

1. Can any agreements be drafted to cover those eventualities?
2. Shareholders, partnership or unit-holders agreements

• Can provide certainty
• Legal advice essential

NSW Trustee and Guardian

1. Should you engage with the NSW Trustee service to make your will, enduring power of attorney and appointment of enduring guardian?
2. Long established and reputable trustee company.

• If your affairs are complicated it pays to get more specialist advice.
• May be inflexible in dealing with your estate.
• Most of my clients want a relationship - not just a “one off service”.

Remember wills are not SET and FORGET.

To find out more go to their website: https://www.peastonlegal.com.au/