If you’re a small business owner, it’s important to plan not only for the future of your business but also for your family’s future. Part of this planning should include creating a will and an estate plan.
It is imperative to determine what will happen to your business and all of the assets that are included if something happens to you in the unfortunate case of death or injury.
1. If you don’t leave an estate plan with directions about what should happen to your business, actions may be taken against your wishes.
If you pass away without any written estate instructions, you’ll become what’s known as an intestate. Under these circumstances, your estate will be divided up according to the laws of the province you lived in.
A family member may apply to the courts to act as the estate administrator (also known as the estate trustee). If the court grants a certificate of appointment, the administrator must identify and settle any debts within the estate. Anything leftover is to be distributed by the administrators, based on legal heirs.
The usual order of priority is:
- And then more distant family members such as nieces and nephews
If a member of your family isn’t willing or able to take on the task of administrator, then the court may appoint a trust company to undertake the task.
Without clear instructions, there may also be delays, additional expenses and significant inconvenience to your survivors in settling your affairs.
Please also note, even if you’re happy for your estate to be divided up based on the laws of the province you live in, you should still have a legal document in place to state this!
2. Your will must be in writing & signed in the presence of two witnesses
For your will to be valid, it has to be in a written format – either typed or handwritten. It must be dated and signed by the testator in front of two witnesses. They must both be present at the time of signing the will.
Without a signed, written document, it is hard to prove your last wishes.
3. Your will must show a record of your last wishes
Think of your will and estate documents as parts of your overall business plan! What’s the point of building up a successful small business if you don’t properly plan for its future?
As a business owner, it is essential that you have a written record of who you want to leave your business to and how it should be operated.
4. Consider having an Enduring Power of Attorney in place
This document could be the single most important document you have prepared as a small business owner.
An Enduring Power of Attorney is a legal document that appoints someone to make legal and financial decisions on your behalf in the case you become incapacitated.
You have to be fully competent at the time of assigning a Power of Attorney, so this is definitely something you should plan for well ahead of time.
5. Succession planning goes further than creating a will and estate
Succession planning is separate from your will and estate plan. Succession planning directly relates to the business itself and ensures a clear strategy that will ensure your business operates as usual.
Having a good succession plan in place can help ensure that the transfer of your business ownership goes smoothly in the case of retirement, sale, death or injury. Having a succession plan in place will address a number of factors including:
- Tax planning
- Corporate Structuring
- Leadership and roles
- Business goals
- An estate plan
You and your business are unique and your will should reflect that. We encourage you to avoid trying to write your own will or using a template as it could lead to costly mistakes that your family is left to deal with.
At Benchmark Law, we can facilitate professional will and estate planning to ensure your business and estate are protected.