Home' Charter : 0711 Charter July Contents July 2011 I Charter 35
Lead > Passing on
PhotograPh: horrillo i riola / Photolibrary
Don't leave your family with the burden of having to work out
how to deal with your business once you have passed on.
Plan ahead is the take-home message.
Story Natalie Apostolou
Estate planners and life insurance agents
have long been tarnished with the tag
of doom merchants, but while the human
compulsion is to deny the inevitability of
death, the wise business operator cannot
afford to ignore their message.
We know the Australian population is
aging rapidly but it is also fragmenting. For
both these reasons, corporations and small
practices alike need to look more vigilantly at
succession planning and risk management for
their senior managers or business owners.
Current statistics claim that around 60 per
cent of Australian’s die without a will. More
disturbingly, there is an average of $2.5 trillion
of personal wealth that is left unprotected
because there is no will in place. Dying
intestate is always a complex scenario and for
the family left behind it can be a nightmare if
business assets are also part of the estate.
The bottom line is that dying intestate or
without a strategic plan in place for the future
of your business operation means that there
will be a signifcant period of time before
benefciaries or decision-makers can access
the assets of the deceased. If the deceased
was the owner or signifcant shareholder
of a company, then the company faces a
crippling time until the estate is resolved.
The rise of the small business community
and sole practitioners, particularly in the
fnancial services sector, is becoming
more pervasive thanks to the benefts of
an online economy. But as a new breed
of executives enjoy their independence
from big corporate life, the need to plan for
worst-case scenarios takes on a far more
High-profle executives are not exempt.
Mobile phone millionaire ‘Crazy’ John Ilhan
died suddenly in 2007 at the age of 42
while running a proftable and successful
business. His wife had to swiftly step up
and ensure that the 120 stores and 600
employees kept running.
She remained on the board until selling
her inherited 75 per cent stake in the
company four months later. While Ilhan had
an estimated fortune of $310 million, details
of his fnances revealed that he had assets
of $14.5 million and personal debts of $19.5
million at the time of his death. The Ilhan
family had a complex asset structure and
while his wife was far from broke as sole
recipient of his estate, she still had to dive
into the business. Unlike many bereaved
in her situation she had a strong business
background, but it is rare that the spouse of
a company owner can easily fll or even want
to fll their shoes.
For owners of a business or a professional
practice, estate planning should be viewed
as something that is part of the company’s
business plan. For business owners it is
highly likely that a signifcant portion of their
personal wealth and their family’s primary
source of income is tied to the enterprise.
A good estate planner will ensure that the
business is either carried forward within the
family or sold for the best possible return.
Both outcomes require careful forethought
and planning before illness or death strikes.
KEEPING IT IN THE FAMILY
The Australian business community is often
rocked by the unexpected deaths of its
leading lights and then even more shocked
by the lack of succession planning behind
The Institute of Chartered Accountants
professional standards consultant Catherine
Kennedy FCA, says that unprepared
spouses and family members are often left
in a precarious situation of intense business
responsibility after the sudden death of a
partner and rarely know how to handle it.
To stop this from occurring, the Institute
advises SMEs and sole practitioners in
particular to bring the issue up periodically
as a matter of business. “It is really about
implementing a risk management strategy,
as at the end of the day you never know,“
says Kennedy. She adds that the fate of
a business is “a family decision not just
the business decision” and needs to be
Kennedy says that it is crucial that a
contingency plan or strategy is put in place,
to address the possibility of an untimely
While the right solution varies for each
company and situation, she suggests that for
some sole practitioners it may be benefcial
to appoint an executor to the estate who
understands the business and can advise
the family on how to handle the asset.
“If you are the spouse you have this
practice that potentially is a valuable asset.
The better the asset, the more money you
Links Archive 0811 Charter Aug Navigation Previous Page Next Page