As many entrepreneurial business owners climb the ladder to success, what is often forgotten along the way is who will take their legacy forward when they are no longer there.
Achieving your business goals is meaningless if your business dies when you do. For this reason, business owners should consult their financial adviser to assist in crafting a will which takes the current legislative framework into account.
Your will should also carefully detail how you want your business affairs to be handled when you die, and elaborate on the roles each person will take.
At Absa, we guide our clients through long term financial planning which includes insurance, investment and retirement planning. When a client runs a successful business venture they need to think about how it will be sustained after their death. Are there children who would be interested in taking over the business, and do they have the capabilities to run it? Another question to ponder is who to sell to if the children are not interested.
As a business owner, you must verify your business assurance, current value of the business and whether it is aligned to the various applicable laws, such as tax. In some instances, an adviser will detail the best way for you to plan your estate to legally reduce the exposure to heavy estate duties. Many families find themselves unnecessarily burdened with this when their loved one dies. This sort of planning is especially pertinent when you are an ultra-high net-worth individual.
In South Africa, estate duty is an onerous burden if not carefully planned for. The South African Revenue Service (SARS) taxes the deceased estate on a sliding scale and takes into account everything a person owns when they die – property, bank accounts, investment accounts, stocks, bonds, vehicles, boats, airplanes, business interests, and real estate.
From February last year, SARS implemented a new tax rate of 20 percent on an estate worth less than R30 million. If, however, your estate is worth more than R30 million, this tax rate moves up to 25 percent.
Financial advisers can guide clients on any relevant legislative changes, as well as the best way to structure their business so that the legacy continues. This may include updating your trust fund structure, as SARS is very strict on this and a trust should be set up taking into account the relevant rules and regulations.
Another important aspect that must be taken into account, especially by ultra-high net-worth individuals is the type of marital regime they enter into in terms of the Marriages Act of 1961. When a marriage partner dies, the remaining spouse can choose to inherit under the will, or under the marriage contract.
These are all important aspects worth discussing with your financial adviser, as they have a direct bearing on your legacy.