Why Estate Planning is important for families with businesses-Part Two

For families who own small and medium enterprises (SMEs) in New South Wales, estate planning is not simply a personal exercise — it is a critical business continuity strategy. When a business is intertwined with family wealth, income, and identity, failing to plan can expose both the enterprise and the family to significant disruption.

1. Business continuity on death or incapacity

If a director or shareholder of a private company dies unexpectedly, decision-making can stall immediately. Bank authorities may freeze accounts. Contracts requiring director guarantees may be triggered. Disputes can arise between surviving business partners and the deceased’s family.

Under the Corporations Act 2001, company governance continues according to the constitution and replaceable rules — but that does not resolve ownership issues. Shares form part of the deceased’s estate and pass under their will (or under intestacy if there is no will). This may result in spouses or minor children inheriting equity without any operational capacity to run the business.

A tailored estate plan ensures:

• Shares pass in accordance with a structured succession strategy.
• Buy-sell arrangements are properly funded (often via insurance).
• Control and management rights are clearly separated where appropriate.

2. Avoiding intestacy under the Succession Act 2006

If a business owner dies without a will, their estate is distributed under statutory intestacy provisions. This can fracture ownership across multiple beneficiaries, creating shareholder disputes or deadlock.

In blended families, the statutory formula may divide business interests between a spouse and children from prior relationships. For an SME, this can be commercially unworkable.

A carefully drafted will can consolidate control, preserve voting rights, and ensure that non-active beneficiaries receive value without destabilising the company.

3. Trust structures and control risk

Many SMEs in NSW operate through discretionary trusts. While assets are held by a trustee, real control often lies with the appointor or principal.

If the appointor dies without clear succession provisions, control of the trust can become uncertain or contested. In some cases, this has led to litigation and the effective loss of business control.

Estate planning must therefore address:

• Successor appointor provisions.
• Corporate trustee directorship succession.
• Alignment between the trust deed and the will.

Without coordination, families risk unintended shifts in control.

4. Tax efficiency and asset protection

SME families frequently accumulate wealth in trading entities, related property trusts, and self-managed superannuation funds. Poorly structured estate planning can trigger unnecessary capital gains tax, stamp duty issues, or adverse income tax consequences.

Testamentary discretionary trusts can provide:

• Income streaming flexibility.
• Protection from bankruptcy or family law claims.
• Structured asset preservation for future generations.

Given the exposure SME owners often face — personal guarantees, litigation risk, economic volatility — asset protection is not theoretical. It is practical risk management.

5. Incapacity is often the greater risk

Business disruption is more likely to arise from incapacity than death. An accident or illness can leave a key director unable to act. Without an enduring power of attorney or properly drafted company provisions, urgent decisions may require tribunal intervention.

In NSW, families may need to apply to the NSW Civil and Administrative Tribunal for financial management orders — a costly and public process that can damage commercial confidence.

For SME families, estate planning is about preserving enterprise value, protecting family relationships, and ensuring seamless succession. In a state where private businesses form the backbone of the economy, failing to align personal estate planning with corporate governance creates avoidable risk.

A coordinated strategy — encompassing wills, trust control, buy-sell agreements, superannuation nominations, and incapacity documents — safeguards not only the family’s wealth, but the livelihood of employees, clients, and future generations.

For SME owners in NSW, estate planning is not optional. It is foundational business planning.

For more information about estate planning for families, please refer to the first article in this series: Part one: Why Estate Planning is important for young families.

If you are interested in preparing or updating your estate documents, or would like to speak with a member of our experienced Estate Planning Team, contact Solari and Stock on 8525 2700, alternatively or click here to request an appointment.

Our Estate Planning Team includes Rebecca Exley, Michael Solari, Nicole Commandeur and Valentina Abouzeid.

Article by Rebecca Exley
Image created in Canva