What happens to my business if I die without a succession plan in Victoria?

Without a succession plan, your business interest passes according to your Will (or intestacy laws if you have no Will). For companies, your shares form part of your estate. For partnerships, the partnership may dissolve by operation of law. For trusts, the assets remain in the trust but control of the trustee and appointor roles may become disputed. Without a buy-sell agreement or shareholder agreement, your co-owners may find themselves in business with your spouse or children — who may have no experience or desire to be involved. A Victorian court may need to be involved to resolve disputes, causing significant delays, costs and damage to the business.

What is a buy-sell agreement and why does my business need one?

A buy-sell agreement (sometimes called a business will) is a legally binding contract between business co-owners that specifies what happens to each owner's interest if a trigger event occurs — typically death, total and permanent disability, critical illness, bankruptcy, divorce, or voluntary exit. It sets out who can purchase the departing owner's share, at what price, and how the transaction is funded (usually through life insurance). Without a buy-sell agreement, your co-owners may be forced to work alongside your estate's beneficiaries, or a forced sale may be required at an unfavourable price. We recommend discussing the legal structure of your buy-sell agreement with a qualified solicitor and the insurance and tax components with your financial adviser and accountant.

Can I include my family trust in my Will?

No — the assets held inside a discretionary family trust do not form part of your personal estate and cannot be left in your Will. What you can do is plan for who will control the trust after your death by ensuring the trust deed provides for appointor succession and trustee succession. The appointor role — the person with the power to remove and appoint the trustee — is the critical control position. If your trust deed does not name a successor appointor, the trust may become subject to dispute or court intervention. We recommend reviewing your trust deed with a qualified Victorian solicitor as part of your estate planning.

Does my superannuation form part of my estate as a business owner?

Superannuation does not automatically form part of your estate. It is held in trust by your superannuation fund and falls outside your Will unless the trustee exercises discretion to pay benefits to your estate. For SMSF members, a Binding Death Benefit Nomination (BDBN) is a critical document that directs the SMSF trustee to pay death benefits to a nominated dependant or to your estate. Without a valid BDBN, your SMSF trustee has discretion over how benefits are paid. We recommend discussing your BDBN and overall SMSF succession strategy with both your legal adviser (for the legal documents) and your accountant or financial adviser (for the tax and financial implications).

What is a testamentary trust and how does it help business owners?

A testamentary trust is a trust created under your Will that comes into effect upon your death. For business owners, it can be used to hold business assets (such as company shares) for beneficiaries rather than distributing them outright, providing asset protection from creditors and Family Court claims. Testamentary trusts may also offer income-splitting opportunities — we recommend discussing the tax implications with your accountant. Importantly, testamentary trust provisions must be carefully drafted to account for existing business structures, capital gains tax implications, and small business CGT concession eligibility. WealthShield Legal prepares testamentary trust Wills as part of our estate planning packages.

How is a private business valued for estate planning purposes?

Valuing a private business for estate planning is more complex than valuing listed shares. Common methods include the earnings multiple (EBITDA multiple), asset-based approach, discounted cash flow (DCF), and market comparison. Each method produces a different result, and the appropriate method depends on the nature of the business, its industry, and the purpose of the valuation. For buy-sell agreements, valuation methodology should be agreed in advance to avoid disputes. We recommend engaging a qualified forensic accountant or business valuer (such as a member of CPA Australia or CA ANZ) for a formal valuation, and discussing the tax implications with your accountant.

What estate planning documents does a Victorian business owner need?

A comprehensive estate plan for a Victorian business owner typically includes: a testamentary trust Will with provisions for business assets; Enduring Powers of Attorney (Financial and Medical); a reviewed and updated shareholder agreement or partnership agreement with buy-sell provisions; trust deed review (if you operate through a family trust) to address appointor and trustee succession; Binding Death Benefit Nominations for any SMSF; and coordination between all documents to ensure they are consistent. WealthShield Legal's Comprehensive Estate Plan is designed for business owners and includes all legal documents, trust deed review, and coordination with your accountant and financial adviser.

Business Owner Estate Planning Victoria