Control of your company or trust after your death

Many people overlook the importance of planning for business control after death, often not thinking about what will happen to their companies or trusts until they’re asked pointed questions during estate planning. If you own a business, act as a trustee, or control any corporate structures, it’s crucial to address these issues in your will to ensure a smooth transition and protect your legacy. Here’s an overview of key considerations for managing control of your company, trust, or business after you pass away. 

1. Control of a Company After Death 

For business owners, one of the most pressing questions is: "Who will control the company after I die?" This is particularly relevant if you are a sole director or a significant shareholder. 

a. Company Structure Review 

Before making any estate planning decisions, it's essential to review your company’s constitution. The constitution will outline how shares are managed and what happens when a director dies or becomes incapacitated. In many cases, it will specify that a deceased director's legal personal representative (such as the executor of the estate) can appoint a new director to manage the company. 

b. Appointing a New Director 

For sole director-shareholder companies, Section 201F of the Corporations Act allows the personal representative to appoint a new director upon the death of the sole director. In your will, it is advisable to include a direction for appointing a new director, especially when no other directors are in place. 

c. Joint Directorships 

If you share directorship with someone else, such as a spouse, and you pass away, the other director will typically continue in their role. However, it's wise to specify a backup plan for appointing another director to ensure the continuity of business operations. 

2. Managing Business Shares 

When planning your estate, it's essential to think about what will happen to your shares in the company. Shares can be passed on just like other assets, either to family members or placed into a testamentary trust. The shareholding details will also be influenced by the company’s constitution, which may include restrictions on transferring shares or outline the process for doing so. 

3. Trust Structures and Control 

If you have a family trust or another type of trust, it’s essential to understand the distinction between the trustee and the appointer. 

a. Trustee and Corporate Trustee Control 

The trustee is responsible for managing the trust. In many cases, the trustee is a company with directors controlling the trust’s administration. Therefore, the same considerations for appointing a new director apply here. 

b. Appointer’s Role 

The appointer has the power to appoint and remove the trustee. In some family trusts, only one spouse may be designated as the appointer. In your will, you can include provisions for appointing a successor appointer to ensure continuity. 

4. Self-Managed Super Funds (SMSF) 

If you manage your own superannuation through a self-managed super fund (SMSF), it’s important to recognize that control of the fund may also require the appointment of new trustees or directors of the corporate trustee. By law, SMSF members must be either trustees or directors of the corporate trustee, so it’s necessary to maintain this structure after your death. 

5. Sole Trader Considerations 

Operating as a sole trader differs significantly from owning a company or trust. In a sole trader structure, all assets and liabilities are held in your personal name. When you die, any contracts, business assets, and debts become part of your estate, and the business itself ceases to operate. This structure works best for smaller businesses, like trades or personal services, but can complicate matters if you have numerous contracts in place. 

6. Protecting Business Control for Minor Children 

When you have minor children, business succession planning is even more crucial. You need to decide who will manage the business in the interim, until your children are old enough to take over or until you can transfer shares or trustee roles to them. In such cases, setting up a testamentary trust or appointing a trusted guardian to manage business affairs temporarily may be necessary.
 

7. What to Do Next 

When planning your estate, be sure to discuss the following with your lawyer: 

• The roles of directors, shareholders, trustees, and appointers in your companies and trusts. 

• Any specific business structures, including corporate trustees for family trusts or SMSFs. 

• Provisions for appointing successors to manage business control. 

• Any unique arrangements needed for minor children. 
  

Conclusion 

Failing to plan for the succession of control over your companies and trusts can leave your business assets vulnerable, create legal challenges, and put your family in a difficult position. A well-thought-out estate plan that addresses these elements ensures a smoother transition and safeguards your legacy. 

If you’re unsure about what steps to take, speak with a lawyer experienced with testamentary trusts who understands business succession and estate planning intricacies. At Vicca Law, we can review your situation, discuss your options, and help you set up a plan that aligns with your wishes and protects your business interests. 
 
For personalised advice visit www.viccalaw.com.au to schedule a consultation, or email Lidia directly at lidia@viccalaw.com.au. Let’s discuss how we can ensure that your company, trust, or sole trader business is properly managed according to your wishes after you’re gone.