3 estate planning tips for small business owners
We'd all like to live forever, but we all know that's not an option (yet). As such, it's important you plan for what happens to your estate when you eventually pass away.
Responsible wealth management isn't limited to growing and protecting your assets while you're alive. Here are three tips for effective estate planning.
1. Where there's a will, there's a way
The most important thing for passing your assets onto those you care about is a will – the document that outlines where assets are allocated to after you pass.
If you pass without a valid will, this is what's called "dying intestate". In this situation, your assets are distributed according to the inheritance laws of Australia and its states. Basically, if your intentions aren't documented, they might as well not exist. While the right people may still get your assets under inheritance laws, their tax burden may be far greater than if you had planned ahead.
2. Think about tax
Taxes on inherited assets vary by their class and the situation around them.
For example, assets like houses or other capital that may have grown in value since being purchased are only subject to capital gains tax (CGT) when sold. If the ownership of these capital assets is simply transferred, they won't be taxed with CGT.
On the other hand, if there are income streams going to a beneficiary of your estate, they will be assessed for taxation as any other income would be.
3. Outline a succession plan
Having a plan in place for who takes over the business after you're gone is another key part of estate planning. A full plan will be detail-rich, potentially including elements such as how the business's legal structure may have to change, the nature of contracts and agreements, and key personnel changes. Think of it as a map of how the business would continue to function in your absence. Who would take over the jobs you do? And who would become the owner of the company? These are all things you can hash out in a succession plan.
The assets you've built up over your life are worth a lot – make sure they get to the right people after you move on by employing professional help. Contact us today to learn more about how we can help set your affairs in order.