This was said by Benjamin Franklin at the creation of the United States Constitution. It remains a truism, even though the average age has now more than doubled since this statement by Franklin. It is good to think about what the situation would be like if you had died yesterday.
Especially when an entrepreneur dies, there are suddenly a lot of questions.
- Is there a will and what does it say? Is optimum use being made of all tax facilities?
- Who should arrange everything?
- Who should have control over children's assets, even if they are young adults?
- Are there prenuptial agreements and what do they contain?
- What kind of legal jacket is the business in? Is it sole proprietorship, general partnership, is it a structure with one or more limited liability companies?
- Who is aware of the ins and outs of the business?
- Who will continue the business? Is it the surviving spouse or partner?
- Does a child have the capabilities and ambition to continue the business? Or are there employees who are suitable for this?
- If there is a B.V., is there a shareholder resolution appointing someone to lead it when the director is no longer there?
And so there are a lot more questions that can be asked.
Since the law states that everything goes to the surviving spouse and children only get something when the latter dies, it is still sometimes thought that no will is needed. For entrepreneurs, a good will is a dire necessity. This is even more so if there are children from different relationships.
When inheriting assets, it is also good to consider the impact of the acquisition of those assets in combination with death on the life of the heir. If that impact would be too great, which is more likely with younger than older people, it is desirable to take measures. These could include familiarising oneself with assets already during one's lifetime, as well as instituting a trust or certifying shares and/or other assets.
There seems to be a tendency for it to be considered unethical to pursue tax optimisation. Poorly designed prenuptial agreements and wills can cause a business to be discontinued. In special situations, levying more than 100% tax on the balance of the estate is a possibility.
As reported, letting the tax consequences run their course can have major consequences for the business. But even in a situation where the business has been sold and there is effectively just a bag of money, a death can cause tax levies to leave too little for the surviving partner to live on undisturbed.
If you can read this and walk around happily, you are not too late to get everything right. If it's been more than five years since you've had these things sorted, it's good to take another look at things.
