Transferring control (or defacto ownership)
Controlling credit risk is an important issue for most people. Increasingly, on expert advice, business and property structures are set up such that the owner of the business or property is not an individual but a company, or as is most often the case, a family discretionary trust.
This means that the individual controller of the company or trust does not own the property and the assets in the company or trust do not form part of the controller’s estate.
However, the individual controller of the company or trust can transfer control of the company or trust by transferring their majority shareholding in the case of a company or their power of appointment in the case of a trust.
CharterLaw Legal can assist in preparing the necessary documents to transfer control as part of your estate plan.
For most families, superannuation is second to the family home as the most substantial investment that the family makes. This is often ignored when formulating an estate plan. Your estate plan for your superannuation fund should address the following issues:
- whether you make a binding or non binding nomination on the trustee of your superannuation fund directing the trustee how to pay your super fund death benefits;
- paying your death benefits to an individual(s) or the legal personal representative of your estate;
- knowing the level of insurance your super fund insures you for death and total permanent disability (TPD).
If you are a member and trustee of a self managed super fund (SMSF) it is important that you understand that the executor of your will steps into your shoes as trustee of the SMSF and has the power to make distributions of your death benefits which may be contrary to your wishes.
Careful consideration needs to be given when making provision for your superannuation death benefits in your estate plan and this includes the use of an equalisation clause in your will so that on a global basis the objectives of your estate plan are achieved.
Succession planning for business owners and controllers
Succession planning for businesses may involve any one or more of the following tools:
- buy/sell agreements between co proprietors/principals;
- shareholders agreements and unitholders agreements that incorporate put and call options;
- the sale of shares/units in the company/trust in tranches whereby the key principal or stakeholder of the business dilutes their interest in favour of their successor(s). This requires careful planning to deal with CGT arising on each tranche sale so as maximise the small business CGT concessions.