The Importance of Estate Planning for New Parents

May 2016

1 What Is Family Future?

Real Life Stories: Estate Planning for New Parents

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LEGAL - WEALTH PROTECTION - INVESTMENT - BUSINESS - LIFESTYLE - SYDNEY

page 78 Steps To Buying A Business

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page 9How To Protect Your Business In a Divorce?

Estate Planning & New Parents

The Importance of

Estate Planning for New Parents

PAGE 1 OWEN HODGE LAWYERS

With a new baby in the house, new parents have a lot to think about other than estate planning. And to be frank, estate planning has something of a musty, dreary reputation that seems completely inappropriate to the moment. So think of it as life planning for that little ball of energy who now seems to occupy most of your conscious waking thoughts. But do not put it off. Whether estate or life planning, it need not be as difficult as you may think.

PAGE 2OWEN HODGE LAWYERS

Why New Parents Need Estate Planning Life can change in an instant, utterly without warning. According to the Australian Bureau of Statistics, in 2012, more than 4,000 people who died in Australia were between the ages of 30 and 44, at precisely the age to leave minor children behind. As new parents, you now are responsible for a small person’s welfare. It is true that when parents die without an estate plan, the courts eventually will distribute assets and otherwise make provisions for children, but it is a slow process and the decisions made, including the all-important choice of a guardian, may not be the choice you would have made. Many people have informal conversations with loved ones about the care of their children, but unless these intentions are formalized legally, they have no binding effect.

The Key Components of Estate Planning for New Parents Estate plans can become a very elaborate affair and that may be why many young families put off the basic work of providing for their children’s future. At its simplest, an estate plan probably really only needs four things: a will for each parent, a guardianship arrangement for the children in the event of the death or disability of both parents, a trust to provide for the holding and distribution of assets for the children’s benefit and life insurance for both parents.

Wills A will is a simply written document that details how your assets should be distributed after your death. Many parents choose each other as primary benefi-ciary and their child as secondary beneficiary in the event that both die at the same time in a tragedy like a road accident or natural disaster. A will also should designate an executor who will have the authority and responsibility to carry out the will’s terms. Parents of young children also should designate a guardian for them and someone to manage the assets and property you leave to them. The guardian and asset manager need not be the same person.

Guardianship In general, the legal guardianship of a child goes to the surviving parent if the other dies. But if both

parents die at the same time, or if one dies and the other becomes incapacitated, a guardian would need to step in.The chosen guardian is often a friend or family member, and it is essential to discuss this with that person in advance. A good guardian should have the time, resources, interest and good judgment to raise your children. You and your spouse should agree on the same guardian to avoid legal battles. Most couples choose the same guardian for each child to keep the family together.

Trusts The purpose of a trust is to hold and manage assets for your children. The trustee chosen by the parents can manage the assets and handle payouts to the children, paying taxes and transferring the property to the child when he or she reaches a certain age. A trustee should, above all, have sound financial judgment and the ability to work well with the children’s guardian. Many trusts make assets available when the recipient turns 18 or 21, but parents may choose any age and a wide variety of payout arrangements. Without a trust, assets are subject to taxes and probate.

Life Insurance Life insurance can help replace the income your family would lose in the event of your death and cover funeral and burial expenses. Parents who are young and healthy usually can buy affordable term life insurance.Life insurance policies must name beneficiaries, which can create something of a conundrum with minor children. One approach is creating a living trust as beneficiary of the life insurance policy. That way, if both parents die at the same time, the child will have access to the money through a trustee.

What is Family Future At Owen Hodge Lawyers, we try to make it easy for new parents to provide for their children’s future. Family Future is our approach to bundling the basic estate planning services all young fami-lies should have, and at an affordable price. It is also an excellent way to ensure all the pieces of an estate plan – the will, trust, guardianship agreement and insurance — work together as a coherent whole. But it is not a one-size-fits-all approach. The skilled assessment process is an opportunity for every family to evaluate particular risks so the plan works. for real needs.

Real Life Stories Estate Planning & New Parents

A mother of two passed away suddenly caused by a rare heart condition. Her inconsolable husband was left to care for two children under the age of 5 years, making full time work practically impossible.

Through proper estate preparation, the couple had life insurance which paid a sufficient sum to fund the father-of-two’s time off work for three years, enabling him to get the family settled and into school.

Through will planning, the couple was able to direct a portion of that fund into trust to pay for the chil-dren to attend schools that their mother desired - protecting her ambition.

A tragic road accident involving two parents lead to one parent passing away and the other severely injured and hospitalised for many months. Three surviving children would have been split between extended family in separate stated of Australia without proper estate planning by the young couple.

The wills of both parents specified that in the instance of tragedy, their children were to live with and be cared for by good friends of the couple. A financial fund was derived through insurance.

By testamentary trusts and appointment of the family accountant as trustee, the financial future of the children is protected. The accountant is also an alternative lawyer on the powers of attorney so the couple’s wishes can be put into effect even while one parent is alive, but incapable of affecting their own intentions.

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Real Life Stories Estate Planning & New Parents

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A 58 year old is a sole carer of his two young grandchildren after their sole supporting mother and their mother’s grandparents passed away prematurely within months of each other.

The grandfather was forced to reture prematurely and is too yound to access her superannuation, which results in a severe financial strain.

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A young policeman purchased life insurance a year before he died in a tragic workplace accident.

While he didn’t know the importance of his purchase at the time, the policeman’s widow and young children were catered for with a fund of $2m after his death.

This fund allowed his family to experience the same financial situa-tion as if he was alive.

PAGE 7

What is Family Future?

Our lives are changing. It’s not uncommon for both parents to work, the pace and demands of our professions are increasing, travel is on the rise and holidays are required to maintain work/life balance. More than 4,000 of the 160,000 recorded deaths in Australia throughout 2012 were the tragic deaths of people aged between 30 and 44 – many of whom had made no preparation, leaving their loved ones in a state of shock, uncertainty and despair.

What is

Family Future?

PAGE 5 OWEN HODGE LAWYERS

Family Futures is a modern estate plan that targets at parents of young families in Australia.

Traditionally, estate planning is a consideration for older generations who understand the severity of loss because of the prevalence of such in their age bracket.For the first time, estate planning has been redefined, tailoring the planning product to meet the needs of parents of young children – based on our changing lifestyles. With this comes an increasing rate of dependency and the increasing need to plan. Family Future is designed to give parents of young children peace of mind, ensuring definitive answers to questions such as: How would my mortgage be repaid if I was unable to pay it? What would happen to my family if they were no longer receiving my income? Who would take care of my children if I couldn’t? Which schools will my children attend for their best chance at a bright future? What sort of funding can be set up and at which point and by whom would this funding be released? Family Future is more than a will.

It’s a better solution for a brighter future. Incorporat-ing will preparation, insurance, testamentary trusts, power of attorney and risk assessment, Family Future specifically focuses on the needs of young families and tailors specific plans. To ask a question or have a chat about Family Future, please don’t hesitate to contact us at 1800 770 780. Benefits and Features

Family Future is a highly flexible, consultative planning service for parents of young Australians, guaranteeing the adequate care and provision for families in the unfortunate event of a tragedy. It covers all potential considerations that may face a family met with tragedy – whether the tragedy occurs in Australia or abroad. Family Future can include: - Legal advice and recommendations - Establishing and implementing a Will - Testamentary trusts - Enduring Power of Attorney Family Future ensures your family benefits from security in the event that one or both parents die prematurely, and in the event of interruption to everyday life and income by illness or injury. The establishment of suitable Will and testamentary trusts ensures insurance money is administered by a suitable nominee, and parents receive a predeter-mined choice as to who their children would live

with in the event that they both die prematurely.

An investment into Family Future is an investment into the security and protection of the people you care for the most. Family Future: for peace of mind that your partner and children will be cared for if tragedy strikes; for the assurance that life’s unexpected turns are navigated through; for protection and security when you need them most.

How to Apply

Planning for your family’s future is simple and straightforward. A relationship with the experts at Owen Hodge Lawyers will ensure every question you have is answered and you feel comfortable each step of the way. The steps are: 1. Contact Owen Hodge Lawyers for your Estate Planning Assessment. The process is flexible and consultative. 2. Fill in the Estate Planning Review Checklist and bring it with you when you meet with our experienced estate planning lawyer. Estate planning requires a lot of careful consider-ation as well as a number of documents and forms, including wills, power of attorney forms, and living wills. The Estate Planning Review Checklist can assist in preparing your estate planning documents.Not all questions will be applicable to your situation while others may prompt further considerations. Please answer only the questions you feel comfort-able answering at this time. When you meet with a lawyer, there will be opportunity to discuss the estate planning needs specific to you. 3. An initial meeting with Owen Hodge Lawyers will establish your values, vision and goals, ahead of a seven step process that will guide you from your initial objectives to post-implementation reviews. 4. Owen Hodge Lawyers will provide clear instructions and advice on the preparation of Wills, testamentary trusts and Power of Attorney and all relevant documentation including legal notifica-tions to guardians. Contact Us

if you are interested, please contact us to find out more about family future.

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OWEN HODGE LAWYERSPAGE 9

8 Steps To Buying A Business

PAGE 7 OWEN HODGE LAWYERS

and properly represent the trading figures of the business. Figures provided under a disclaimer are a tell-tale sign that the seller or the accountant/audi-tor preparing them is either unwilling or unable to vouch for their accuracy.

Below are examples of what you will need to know about accounting due diligence:

• A trading or profit and loss statement for the last two-three years; • A balance sheet to identify assets and liabilities; • A list of plant, equipment, fixtures and fittings, which the owner intends to sell and a current valuation and proof of any applicable warranties or guarantees; and • Details of any stock sold with the business and how it will be counted and valued at settlement.

Are you considering buying or acquiring an existing business? This article discusse 8 basic steps for you to consider when buying or acquiring a business in Australia.

1. Making Careful Consideration

Before buying an existing business, you must weigh the pros and cons of doing so. A compelling reason for opting to buy an established business is the presence of a track record and a reputation. A good business history can increase the likelihood of a successful operation and ensure that finance is easier to obtain.

There is less worry about “making yourself known” so finances can be saved. This means that although you have little room to personalise your business from the start, you will inherit, everything good (and potentially bad) about the business. If you do not already know the business beforehand, potential disadvantages can be the inflation of the goodwill element and a negative reputation inherited from the previous owner.

2. Asking the Right Questions

When deciding to buy a business, start by asking what may seem obvious questions. Answers to these will help you decide about taking the plunge and about how to formulate your purchase agree-ment later on.

Some typical questions include:Why and what are the reasons for the business being sold? What is the history and reputation of the business? What are the industry trends and patterns? Who are the customers? Who are the suppliers? Who are the competitors? What are the running operational costs and overheads? Who are the employees, how many are there and will they stay? What are the profits? What are the assets and liabilities?

3. Accounting Due Diligence

An accounting due diligence is a thorough check to evaluate the financial health of the target business. Get certified financial statements which are correct

4. Legal Due Diligence

Depending on the size and complexity of the busi-ness in question, a legal due diligence exercise often takes time and covers several areas and aspects of the way the business operates.

When conducted by lawyers, you will be able to understand issues such as the following:

• Ownership and shareholder issues; • Interpretation of the various contracts which have been signed by the business, including contracts with suppliers, employees, loan documentation, asset ownership and title, leases and licenses negotiated and the existence of restraint clauses; • Whether there are charges, encumbrances or liens on any property, assets or machinery; • Intellectual property issues; • Privacy obligations such as employee information, customer information, trading partners/business associates information and marketing files under the Privacy Act; and • Litigation history to see who the company has sued or who has sued it.

5. Tax Due Diligence

Understanding GST issues, stamp duty and corporation tax is vital. Your accountant will be able to advise you on the seller's financial statements, the

8 Steps To Buying A Business

OWEN HODGE LAWYERS - OVER 60 YEARS OF TRUSTED EXPERIENCE PAGE 8

market value of the business, GST, Capital Gains Tax and other tax issues. He/she may also advise on appropriate business structure options, and to assist with budgets, cashflow forecasts, and projected financial statements for you.

After having conducted the due diligence steps mentioned above, you will be able to enter into preliminary discussions about issues such as price negotiation, valuation techniques, obtaining any relevant government approvals, handling any licensing issues, identifying key value preservation issues like employee retention, transition planning and any other matters that will be documented in the contract documentation stage.

6. Contract Documentation

Details relating to any transaction for the sale or purchase of a business should be documented identifying the subject of transaction, the consideration involved and the expected obligations of the parties.

Entering into a purchase agreement that addresses the following is therefore crucial:

• Identifying the assets to be acquired; • Price and payment modes including payment stages; • Conditions precedent to completion, e.g. 3rd approvals, landlords' consents to assignment of leases and release of bank security over assets; • Transferring employees; • Assignment or novation of contracts of the busi-ness; • Dealing with debtors and creditors of the business after completion; • Arrangements for completion; • Post-completion restrictions on the seller; • Warranties and indemnities, providing for recourse by the buyer against the seller • Limitations on the seller’s liability, including time limits for making claims and financial limits.

Your legal advisers will also be able to advice you on any ancillary documents needed to complete your purchase, such as:

• Novation of key contracts;

• New service contracts/employment agreements for employees; • Transfers of any freehold premises; • Assignments of any leasehold premises; and • Board and shareholder approvals (if necessary)

7. Completion & Beyond

As a buyer, you become the beneficial owner of any individual asset of the target business only after all necessary formalities for completing the transfer of that asset have been complied with. Although many assets may transfer upon completion, you may need to take the risk that some may not transfer until sometime afterwards, or at all. The purchase agreement drafted by your legal adviser will be able identify those matters required to be dealt with or waived at completion, including payment of any part of the price then due.

Be aware that a number of matters also need to be attended to post-completion, including:

• The payment of any stamp duty, land tax or GST; • Formal assignments or novation of any contracts of the business not dealt with at completion; and • Notices of change of ownership of the business to its customers, suppliers and to relevant regulatory bodies.

Whether you are a first time entrepreneur or an experienced buyer, each target business comes with its own unique circumstances and risks.

At Owen Hodge Lawyers, we are able to provide you with insightful legal tips and guide you at every step so that you can make an informed decision about your purchase. Call us today at 1 800 770 780 or contact us via email at ohl@owen-hodge.com.au to schedule a free consultation with our team of estate planning lawyers.

How To Protect

Your Business In a Divorce?

PAGE 9 OWEN HODGE LAWYERS

Proper legal planning may be you and your business’ saving grace. Whether you find yourself on the verge of divorce or whether you are happily married but want to insulate your co-venturers from the ups and downs of your personal life, here are 10 legal tips to protecting your business in a divorce. As a matter of prudence, you may want to ask your business partners to do the same. 1. Consider entering into a binding financial agreement with your spouse either before or during your relationship.

2. Have a buy-sell agreement with any partners. You might think of this as a binding financial agreement with partners. The agreement should specify what will happen if an owner’s status changes, including the business’s rights to buy in that interest at a pre-set price. 3. Keep family assets, banking arrangements and lines of credit separate from business accounts. This may seem obvious, but businesses often start up without a clear financial division between personal and professional resources. Some never get around to making a clean break. 4. Continue to provide access to financial information to your estranged spouse. This may seem counterintuitive, but Australia’s Family Law Courts look sternly on what might appear to be an attempt to hide assets. Transparency is key to a successful family law property settlement, 5. Pay yourself a market salary to counter any argument that you have comingled family and business assets by diverting family resources to support the enterprise. 6. Do not involve your spouse in the running of the business. Make that clear from the outset of both your married and your business life. 7. Put your business and its assets in a trust. This would have to be accomplished long in advance of any hint of divorce, but it is a structure that may enable you to argue that, at least in theory, the trust is the owner of those assets and that they should not be considered part of the matrimonial pool of assets. 8. If you are already involved in a divorce or separation, consider trading your share of other marital assets, such as your house, for your spouse’s equity interest in the business. 9. Sell an equity interest in the business to an outside third party in order to keep it afloat. This may be difficult, since non-family investors may be reluctant to become involved in a business that is threatened by a divorce, but consider it a possibility. 10. Share the business with your former spouse. This may be the least attractive of all possible alternatives, but it may be better than selling the business outright or liquidating assets. Australia’s divorce statistics cannot be ignored. No one should set sail on married life with the prospect of divorce in mind; however, it is important to be thoughtful and deliberate about business matters and relationships. If you are facing divorce, you should seek the experienced professional advice of our family law team at Owen Hodge Lawyers.

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