A good succession plan has the following characteristics:
It must be tailored
Each person and every family is different. A succession plan must be tailored to your specific circumstances.
A review of your unique circumstances will identify succession planning issues that need to be addressed. These issues may include:
- Personal items (such as family heirlooms, antiques or collectables) that need to be specifically dealt with
- Family members who require special treatment because of a disability, addiction or other health concerns
- Business interests
- Family circumstances, such as a second marriage or children from different relationships
- Potential challenges to your Will
- The existence of a self-managed superannuation fund or other trust structure
Your succession plan must be flexible
Your succession plan must be flexible enough to deal with a change of your circumstances and to the circumstances of your beneficiaries.
Where possible, you should avoid locking future generations into arrangements that may become restrictive and unworkable.
The succession plan must be understood by you
It is important that you understand your succession plan, and that it can be understood by others, including your executor and family members who survive you.
If you do not understand it, there is a very good chance that others will also have difficulty.
Unnecessary complexity and ambiguity may serve to defeat your intentions.
Remember, when your Will is administered, you will not be present to explain what you intended: your intentions must be clear from the terms of the Will example.
Succession planning must be reviewed regularly
Succession planning is not a discipline that relies on the “set and forget” principle. A five-yearly review at a minimum is recommended, however there may be circumstances that justify more regular reviews.
Factors that would justify a succession planning review and/or a meeting with your legal adviser to determine whether your succession plan requires amendment include:
- Marriage, separation or divorce
- Entering or ending a de facto relationship
- Having children (including adopted or fostered children)
- The death of a proposed beneficiary
- Other major events occurring in your family
- Major events affecting your assets, including the disposal of an asset that is referred to in your Will
- A change in the need to ensure a gift for spendthrift, intellectually disabled or bankrupt beneficiaries is protected under the Will
- A proposed beneficiary qualifying for a means tested social security pension
- A change to the extent of which your beneficiaries will benefit from other sources, such as jointly held assets, superannuation and life insurance proceeds, and family trust distributions
- Changes to the taxation laws
- The death, aging or ill-health of your proposed executor
- The establishment of a family trust or a new business venture
- The transfer of assets to a business or family trust
- The existence of trust income allocated to a beneficiary that has not been paid to or applied for the benefit of the beneficiary that may require adjustment
- The desire to implement a plan for business accession
Succession planning requires collaboration between professionals and advisers
A good succession plan is the result of teamwork between each of your advisers, your lawyer, accountant and financial planner.
You as the client understand your personal circumstances, beliefs, values and long-term goals and objectives.
Your financial planner has the financial and investment expertise and understands your investment portfolio and risk profile.
Your accountant possesses knowledge of your business structures, such as trust companies and self-managed superannuation fund.
Your legal adviser understands the documentation and legal requirements to give effect to the succession plan and has expertise in drafting legal documents.
Your succession plan relies on thorough data collection
Your adviser must understand your personal, investment and business circumstances. Your adviser should be made aware of the following information:
- Financial circumstances including a summary of your assets and liabilities
- The circumstances of your children and other potential beneficiaries, including marital status, occupation, business interests, disabilities or other factors that might affect their ability to manage money
- The existence of family trusts and companies and business interests
- The nature, extent and ownership of superannuation and life insurance cover
- The identity of people who are financially dependent on you
Before you meet your legal adviser, you should prepare a personal profile document containing information such as:
- Your personal details
- Your marital status, including previous marriages (if applicable)
- The names, ages and correspondence details of all your children and their proposed guardians (if applicable)
- Any special needs your beneficiaries may have that will affect their ability to manage an inheritance
- The executors you wish to nominate
- The existence of an enduring power of attorney
- Your business structure, including details of your superannuation and life insurance
The provision of the above information will ensure that your legal adviser is fully informed about your circumstances and will make the process more cost effective.
You should also give your legal adviser permission to discuss your financial and business affairs with your other advisers.
It is important to seek specific advice regarding your circumstances as this fact sheet provides general information only and does not constitute legal advice.