Around 50% of Australians do not have a legally-valid will. Many of us have it on a -do-later list, risking leaving our loved ones without any financial security if the worst should happen. A will is a vital form of asset protection, giving those you care about a safety net and safeguarding your legacy.
As small business accountants, we have seen first hand how much stress and additional emotional struggle it creates for loved ones when that “do later” is not done until it really is too late.
There are numerous financial, administrative and legal issues when someone passes away without leaving a will. Any small business owner should also regard a will as a fundamental element in their overall financial planning and asset protection strategy.
Protecting your legacy
While building wealth and enjoying a comfortable income is a primary motivator for many small business owners, it’s unlikely to be what your loved ones remember you for. It’s the relationships we build, the influence we have on the lives of people around us and the positive difference we make in the world that lives on after we are gone.
Your will is a way to ensure that the people and causes that matter most to you are beneficiaries of all your years of hard work. Without a will, your loved ones may have no ability to ensure your assets and any financial legacy are distributed as you would have liked.
The risks of not thinking about asset protection
The rules vary from state to state, but in general, when someone passes away without a will the state trustee and the legal system are put in charge. The rules of succession generally favour surviving spouses first and foremost, followed by children or grandchildren in a kind of “winner takes all” distribution. This may not be how you yourself hoped to see your assets shared.
Asset protection needs a clear financial picture
Because your accountant will be involved in managing your money when you are gone, it makes sense to involve them in estate planning from the outset. This increases the protection your estate has against legal disputes or other complications. A good accountant can also work with you and your chosen lawyers to understand the legal and financial implications of matters incluidng trusts, guardianship and power of attorney arrangements.
Your chosen executor will need to know who your accountant is, so ensure they have those contact details. Your executor will need your accountant to provide information including deails of investments, tax obligations, superannuation, insurance policies and capital assets. You can rest easy knowing your accountant will ensure this information is organised, accurate and comprehensive.
Your accountant will also be able to help ensure your loved ones benefit from sound advice. That includes tax-effective strategies to maximise the after-tax value of your assets.
Questions a small business owner should ask
For a small business owner, there are additional considerations here, such as:
- What is the value of the business?
- Do you intend to have it sold, or do you intend to gift it to your chosen beneficiaries?
- What assets and liabilities is the business likely to have?
- What debts and investments are involved?
All of these questions should be discussed with your small business accountant, not only as part of your estate planning, but also as part of your ongoing wealth-building and asset protection strategy. When you know what you are worth financially, you can make more strategic decisions about your own future, and about the future legacy you will leave behind.
To learn more about ensuring your financial legacy is protected, download our free ebook - ‘Your Money, Your Choice - Create Progress’. Or if you are ready to start aligning your financial universe with your long-term goals, book a Discovery Session today.