Home' Charter : 0711 Charter July Contents 36 Charter I July 2011
CHECKLIST FOR THE HEREAFTER
The fortunes of SMEs and sole practitioners are often tied to the business owner’s personal
fnances. In the event of a bereavement, the pain and disruption is often magnifed for family
members as they are left, often unexpectedly, with the burden on managing the business
assets. Keeping these points on the agenda will help minimise the drama.
The Institute of Chartered Accountants in Australia has a valuable family business
succession guide available for members. Check: charteredaccountants.com.au/
> The will. If you don’t have one, get one ASAP. If you have one in place, review your
selection of executor. If you have chosen a spouse or family member, discuss whether
it’s realistic that they could take on business responsibilites immediately after your death.
Perhaps consider appointing a co-executor who is familiar with the business operations.
> Power of attorney. Ensure that the will and power of attorney includes details on the
relationship with business partners including their authority to act on business and bank
accounts, social media accounts and online storage of data. It should also specify the surviving
partners’ ability (and limits to that ability) to take over their business once they’ve passed away.
You can read more about powers of attorney on pages 44-45 of this edition of Charter.
> Life insurance. If you are running your own show, a relevant life insurance policy
becomes less of a luxury and more of a necessity. At base it should cover at least fve
years of major expenses for those who are dependent on your income. Make sure all
insurance policy details are available for the executor.
> Disability insurance. In times of unexpected illness or disaster this can keep your
business afoat. It may not cover all your staff costs but could help hold things together until
a solution is in place.
> Superannuation. Consult your fnancial advisor on how to minimise tax for the
benefciary. Be disciplined about setting aside savings every year and be sure to diversify
> Legal liabilities. Keep a regularly updated fle of any pending or threatening legal issues
and ensure your executor has access to it. Unexpected legal threats have a habit of blind-
siding family members during a bereavement.
> Accounts. Keep a regularly updated but secure inventory of all major assets, accounts,
investments and liabilities and where they’re located, in addition to fnancial data for the
executor. This includes access details, pins and passwords for all accounts, offine and online.
> Passwords and details. The digital age means that a great deal of important
information and access to immediate funds is behind a password-protected area. Keep a
very current list of your computer, e-mail, and voicemail passwords.
are likely to get for it,” Kennedy says.
But she warns that if nothing is put in
place for an emergency and clients are
ringing on the Monday morning after a death,
they may go elsewhere which will quickly
diminish the value of the business.
It was precisely this situation and the
reticence to plan for the inevitable that
prompted Della Churchill, who has a
background in fnance and flm production,
and her business partner Kelly Chapman to
co-launch WrappingUp.com early this year.
The site is Australia’s frst dedicated source
of information on fnalising estates and
dealing with bereavement issues addressing
the personal, business and fnancial
aspects of a bereavement through practical
information and directories.
Churchill says the site aims to help people
become more comfortable about discussing
estate planning at a personal and a
“In any business you have a duty of
Grant Robson, division director of
Macquarie Relationship Banking, says
best practice frms have succession on the
business plan and address the issue regularly.
While larger frms tend to be much more
organised in terms of succession planning
than their smaller counterparts, Robson says
that process is still not devoid of issues.
“Many of these issues are similar to those
of sole practitioners, in particular leaving it
too late to have the succession chat with
good staff. The key issue for many sole
practitioners and small frms is timing, with
many leaving it very, or too, late to address
succession,” he warns.
One way around this is to avoid
discriminating on age when it comes to
broaching partnership chats. Larger frm are
trending towards identifying partner elects in
their late 20s or early 30s, as opposed to the
old school of a long waiting period.
Robson also notes that there is an
increasing use of structures in larger frms,
which offer stakes to staff.
Churchill adds offering a stake to a trusted
employee as an incentive to stick by a small
business often works well. “The model at
large frms where Chartered Accountants take
on partners could be adapted to the smaller
frm or with smaller practices it could mean
making provisions for merging with another
practice, when the time comes,” she says.
Many sole practitioners will have a loose
deal with a friendly frm to sell in the event
of illness or death. These arrangements can
work fne but as they are informal there is a
risk that the frm targeted to take over may
change its circumstances over the years
and not advise the other frm accordingly,
leaving the sole practitioner with no viable
“If sole practitioners wish to have such an
arrangement with another frm, they should
put in place a regular review process to
ensure that both frms remain on the same
page. Best practice would also include
fnanciers in such an arrangement, ensuring all
such factors are considered and agreed upon
by both parties upfront,” Robson advises.
Churchill suggests that family-owned
businesses should also be discussing what
kind of legacy the company may want to
have in the community, for instance leaving
a bequest to a local school or philanthropic
organisation which could also provide tax
Financial planning specialist and Charter
columnist Robert MC Brown FCA stresses
the centrality of including insurance as part
of any business planning strategy. “Having
insurance is very important, it can provide
working capital in a time of stress.”
care to clients to come up with a plan for
situations such as death of the business
owner ahead of time,” she says.
For those in the fnancial industry, that
sense of responsibility is even higher,
Churchill says, and should not be left up to
a bereaved family to make tough business
“In small business it is crucial to ascertain
whether family members want the business
to be passed on to them,” she explains.
“There is no point in passing the business on
to a family member who does not want to
continue running it.”
Churchill suggests that business owners
should encourage staff and family to
periodically think of succession plans. “In
terms of a strategic planning it doesn’t have
to be about death and morbid discussions,
the concept could be introduced as what
would happen if a business owner was
deciding on semi-retirement or taking a leave
of absence,” she says.
Lead > Passing on
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