Estate Planning and company-owned assets

Do assets owned in a family company form part of a deceased estate?

One of the complications for family members after a death is the treatment of assets owned by a family company.  Over a long period of time, the family may have considered these to be part of the family assets. It can be a difficult concept but the company’s assets do not form part of a deceased shareholder’s estate. The assets of such a separate legal entity are not governed by a Will: they are not estate assets.   Accordingly particular attention needs to be paid to them in the estate planning process.

The shares owned in the family company form part of the deceased estate.

Whilst a company is a separate legal entity, testator- owned shares in it do form part of the deceased’s estate.  The company’s continuing existence is not, in most circumstances, affected by:

• the death of an individual shareholder – nor for that matter
• the death of a director or other officer of the company.

Comparing your expectation as to the consequences of the same estate holding shares in a public company is helpful.   In that instance, there is no expectation by beneficiaries that they will have any call on that company’s assets.

Note: whilst the company itself remains substantially unaffected there will be some rearranging to be undertaken, to:

• share ownership, and where necessary,
• directorships, and office-bearers.

Does any other part of a family company constitute an estate asset?

Along with the shares owned in a private company, company debts owed to you will form part of your estate.   These debts will include unpaid dividends previously declared.  Accordingly, their distribution will be governed by the terms of your Will.  Intestacy laws will apply if you die without a valid Will.

This earlier article in this series, details why any loans you advance to a private company should be documented.  The relevant documentation should include all relevant terms and conditions.

What are the consequences for a company with shares forming part of a deceased estate?

…in the short-term:

During the estate administration period, your personal legal representative can exercise any rights that attach to the shares.  The executor of your estate is referred to as your personal legal representative.  In private company situations, care in the choice of your executor should be exercised.  This is to avoid risk that they might exercise their powers ways damaging to other parties’ interests.

…in the longer-term:

The ultimate recipient of your shares in the company will gain your interest in the company assets.  They will exercise any decision-making rights you may have had consequential to that shareholding. This includes a share in the net assets of the company in a winding up of the entity.

Estate Planning is an important exercise at the personal level.   Succession planning is important at the corporate level – especially when more than one family is involved in the ownership of a company.

Where can I get help with Estate Planning and company-owned assets?

The Continuum Financial Planners Pty Ltd Estate Planning service offers clients:

• working with them to prepare the detailed information required for their appointed estate planning specialist lawyer; who can then
• consider the client’s individual detail in light of their estate planning experience so as to design a plan appropriate to the client’s present and known likely circumstances; and where needed
• provision of access to our referral connections of such professionals (to whom we are happy to refer you to match their expertise with circumstances such as your own).

The experienced advisors at Continuum Financial Planners Pty Ltd are available to guide you through the preparation of the information to refer to a legal adviser (estate planning specialist) and ensure that all relevant detail is provided to them.

For an appointment to get your estate plan started:

• call our office (on 07-34213456), or
• use our linked Book A Meeting facility to make an appointment at your convenience.

More about Estate Planning…

This is the eighth in a series of 13 articles on the topic of Estate Planning: further articles in the series seek to bring clarity to some of the issues and implications to be dealt with in fulfilling the three key considerations of Estate Planning – getting the right amount of money, to the right beneficiaries and at the right time; and to prepare you and your family to understand the final plan when drafted. The remaining articles consider –

• Estate Planning outlined;
• Estate planning and flexibility in the modern Will;
• Asset protection using Estate Planning;
• Superannuation death benefit nominations and Estate Planning;
• Estate planning and Business Succession planning;
• Capital Gains Tax impact on estate planning;
• Estate planning and family loans;
• Estate planning for a SMSF trustee;
• Estate planning and superannuation assets;
• Estate planning with a testamentary trust;
• Estate planning for younger children; and
• Estate planning dependent on a valid Will.

(This series was first posted to our website over a period from late-2011 through early-2012; it has occasionally been refreshed/ updated, most recently in August 2024.)