Guest Contributor | Nov 14, 2022 | 0
Business testament smooths succession
Only a sole proprietor is allowed by law to bequeath his or her assets to a beneficiary as stipulated in that person’s testament. All other commercial assets have to be dealt with in a succession document fulfilling the same function as a private testament.
Most people should, and hopefully do, have a personal will and testament, especially if there are assets and children involved. “But have you ever sat back and thought about your assets and everything as a business person, and what should happen with your business interest upon your demise?” asked Lukas Kotze Head of FNB Trust Services.
Kotze said that unless you are a sole proprietor you cannot deal with the assets of your company or CC in your will or testament. “You can only deal with the shares in your company or your membership interest in your CC.”
A buy-and-sell agreement is an agreement between shareholders or co-members enabling the other shareholders or members to purchase the shareholding of the deceased from the estate. It is backed up with life cover on the lives of the partners giving the financial means to purchase the business interest from the estate of the first deceased partner.
“If you have a buy-and-sell agreement in place, this will become the primary option and even without it, surviving shareholders or co-owners have the first right to buy your shares” he said adding that this agreement should be updated regularly to ensure that the increased value of the business is taken into consideration.
About family trusts where the trust deed determines what happens to the assets and not the will, he said “Assets in a discretionary trust are also not personal assets and do not form part of your estate. You should, however, in your Will nominate a trustee to succeed you in case of your death. Also make sure that you do not have all the control in your trust deed as this might lead to other problem areas.”
“Other aspects that need careful consideration are for example any personal guarantees you might still have with the bank since this is a liability in your personal estate. If you are married in community of property, your spouse owns 50% of your assets which includes your business interest. Furthermore, arrears in taxes or outstanding tax returns are winning recipes for delays in the finalization of your estate.”
“Try and make sure there is sufficient cash to cure most problems. Rather plan for every case scenario and ensure at least once a year that everything is still up-to-date,” recommended Kotze while advising that FNB Trust Services is equipped to advise business owners on matters of succession.