A R Walmsley Solicitors Sydney

DOCUMENTS & GUIDES...

ANOTHER LOOK AT THE FAMILY BUSINESS

Peter and Petrina had been in business for approximately 40 years. They operated a large transport and trucking business. They had three children.

Their youngest child, Patrick, had worked with Peter and Petrina in the business. The other two children went to University.

Patrick is now 36 years of age. He continues to work in the business. He is married to Mary and they have two children.

The business was known as P & P Pty Ltd. Peter and Petrina are the directors and shareholders of that company. The company operates the business, owns the trucks and owns real estate. One piece of real estate it owns is the home where Peter and Petrina live and have lived for many years. This may not have been very smart, but it's the reality.

Peter and Petrina are dependent upon Patrick's involvement in the business as Peter's health had been deteriorating. The decision was taken to transfer the business to Patrick so that some form of succession plan could be put in place for the future of the business to enable the business to continue. Peter, Petrina and Patrick understood that Peter and Petrina would be able to live in their home for the rest of their lives. Peter would continue to work in the business as best he could. Patrick would be the manager of the business.

Peter and Petrina transferred their shares in the company to Patrick who became the sole director of the company.

Unfortunately, Patrick was killed in a tragic motor accident. He left a simple Will which stated that the whole of his estate be given to his wife, Mary. The effect was Mary now held all of the shares in the company which controlled the business.

Just prior to Patrick's death the company had been experiencing problems. Mary was left with little money to provide for her two children. She made the decision to sell the business. Peter and Petrina protested. The other children protested. This problem could have been resolved. However, the business was sold which involved the transfer of the shares in the company to the purchaser. Mary realised a considerable amount of money.

All of the assets of the company, including the home of Peter and Petrina, were now controlled by the purchaser. They had to vacate their home. Mary was more than willing to give them money to relocate, but this did not replace their home.

The result of this very simple Will made by Patrick was simply, a disaster. The business was lost. Peter and Petrina lost their home, and their surviving children were disinherited.

There was a solution to this tragic scenario and end result. Careful thought, Estate planning and intelligent questioning would have resulted in Peter and Petrina retaining their home, Mary receiving financial security, and Peter and Petrina's other children receiving an inheritance.

A Will must address the business reality. It can be a simple document but the journey to arrive at that document requires hard work both by the lawyer and the client.

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