Navigating Business, Company, and Trust Affairs in Event of Death or Incapacity

Managing a business, company, or trust adds complexities to estate planning. Ensuring that your business interests remain protected in the event of death or loss of capacity is crucial for asset protection and succession planning. Here’s how different business structures might be affected:

Sole Traders

Impact of Death:

Your business assets and liabilities form part of your estate when you pass away. Your executor can manage these assets by selling the business, continuing operations temporarily, or winding it up based on what’s best for your beneficiaries.

Loss of Capacity:

If you have an Enduring Power of Attorney (EPOA), your attorney can manage your business’s financial affairs. Without an EPOA, a financial administrator may be appointed by the Queensland Civil and Administrative Tribunal (QCAT).

Partnerships

Impact of Death:

A partnership agreement usually dictates what happens if a partner dies. This might involve remaining partners buying out the deceased’s share, dissolving the partnership, or admitting new partners.

If there is no partnership agreement, the partnership will be dissolved.

Loss of Capacity:

The partnership agreement should specify the process for handling a partner’s incapacity. An EPOA can prove useful here, allowing a designated person to manage your financial matters.

Companies

A company is a separate legal entity, which means operations can continue even if a director dies or loses capacity. However, planning ensures a smooth transition for successors.

Impact of Death:

The company’s constitution and shareholder agreements often describe how shares are transferred and new directors are appointed. A deceased shareholder’s shares form part of their estate and are transferred by the executor of their Will or according to intestacy rules.

If you are a sole director and shareholder of a company, your legal personal representative can appoint a new director (including themselves).

Loss of Capacity:

Guidance may be provided in the company’s constitution, or remaining shareholders may appoint a new director. For sole director/shareholders, their Enduring Power of Attorney can appoint a new director (including themselves)

Trusts

Impact of Death:

 The trust deed outlines what happens when a trustee dies. A new trustee/appointor is appointed based on the terms of the trust deed or in some cases, via the Will of the deceased trustee/appointor.

Assets held in a discretionary trust will remain in the trust and will not form part of the estate. Whereas unit trust interests are included in their estate, which will be subject to the provisions of the deceased’s will (if one exists) or, if there is no will, to the laws of intestacy.

Loss of Capacity:

The trust deed will determine what will happen if a trustee loses mental capacity.

Steps to Secure Your Interests

1. Create a Will and EPOA – Keep your Will updated to include clear instructions regarding your business/trust interests. An EPOA allows you to appoint someone you trust to manage your affairs if you lose capacity.
2. Review Partnership and Company Constitutions – Ensure these documents include provisions for the death or incapacity of a partner or director.
3. Review and Update Trust Deeds – Update trust deeds with clauses for appointing new trustees or managing the trust.
4. Meet with an Estate Planning Lawyer – Collaborating with legal and financial advisors ensures proper estate planning to protect your business and personal interests.

Please contact our team for comprehensive estate planning to secure the succession of your business and trust interests.