Why all business owners need a will

Why all business owners need a will

This post deviates from my usual startup and business focus, by discussing a topic most people would prefer to ignore: your will. Why you ask? Well, look at it this way: what is the point of building a successful business if you don’t properly plan for handing that over to your survivors upon your eventual death? Estate and succession planning is an important component of building wealth, and I’ll tackle these issues from time to time. So, on that note, here is a quick rundown of why you need a will. 

As with most of my articles, this post takes into account Victorian laws and practices. Whilst the law in other Australian states is broadly consistent, the specifics may vary.

What is a valid will?

A will is a binding record of what you would like to occur upon your death. A valid will usually needs to:

  • Be in writing;
  • Be signed by you in the presence of two witnesses (who must also sign the document); and
  • Show that you have ‘testamentary intent’ (i.e. a record of your last wishes). 

It also goes without saying that:

  1. you must have the mental capacity to make the will; and
  2. you are not being influenced or coerced by a third-party.

A person who dies without a will is ‘intestate’, and the laws of intestacy determine what happens when they die. I’ve summarised these laws below.

Why you need a will

There are many reasons why all people, and particularly business owners, need a will. I’ve set out below the most important of those:


The only way to have any control over your estate after you die is to have a valid will. Without a will, your wishes are irrelevant when it comes to:

  • Who receives gifts and the benefit of your estate after you die;
  • Who will administer your estate (called your ‘executor’); 
  • How assets get divided, sold and distributed. For example, say you wanted a personal item to remain in the family as an heirloom. Without a will the administrator of the estate will likely sell it);
  • Who will assume control of your business; and
  • Who will be the guardians of any underage children that survive you (e.g. if you and your spouse both die).

If you want your wishes followed in relation to these matters, then you will need a will.

Business Succession

If you are in business with other people, it is highly likely that your business relationship documents will specify what is to occur in the event that you (or your business partner) were to die. Without a valid will, the implementation of these agreed terms will be more difficult (or potentially compromised). This is why a well thought out business succession plan goes hand in hand with a complimentary estate plan.

Even if you are not in business with others, you will still need a will. This is because you are likely control one or more companies or trusts. Some rights associated with business entities may require that a will be in place (e.g. the power of appointment under a trust may require that you appoint a replacement appointor in your will).


Those who die intestate have their estate distributed in accordance with a strict formula set out by law. That formula requires that your spouse, children and next of kin to inherit your estate. This can result in conflicts and disputes. For example, think what would happen if multiple people claim to be in relationship with the deceased person. What if their existence was previously unknown to other members of the family? The cost of resolving these disputes is usually paid from the estate. This diminishes the amount available for distribution for everyone involved.

Whilst similar issues can arise when a valid will is in place, a valid will significantly reduces the potential for conflict.

Estate planning

You need a will in order to properly plan your estate. This means that you don’t simply give away the assets that you have worked your entire life to build. Rather, you leave behind a structure that looks after those you leave behind now and into the future. A well thought out estate plan allows you to:

  • Protect the proceeds of your estate from creditors;
  • Lock away gifts until your beneficiaries reach a certain age;
  • Look after beneficiaries who cannot manage their own affairs (e.g. due to illness or incapacity);
  • Properly deal with any companies and/or trusts that you control; and
  • Leave behind a tax effective structure that could significantly assist your survivors. 

I will be discussing some of these estate planning strategies in follow-up posts [Edit: follow up post is now up]. 

What happens if you die without a will?

There is an urban myth that comes up from time to time, scaring people into thinking that the government will take their assets if they die without a will. Rest assured, this is simply not true.

The “laws of intestacy” set out a strict formula for the distribution of a an intestate persons estate. What do these laws say? Well, without getting caught up in the detail, these laws can be summarised as follows:

  • If you die intestate and leave behind a spouse and no children, your estate is left to your spouse. As mentioned above, ‘spouse’ includes unmarried and same-sex partners. 
  • Your spouse also receives the entirety of the estate if you die intestate and have children from that relationship. If you have children from another relationship, the following will occur:
    • Your spouse will receive all personal items;
    • Your spouse receives the first $451,909; and
    • The remaining funds (if any) are split equally between your spouse and those children.
  • Believe it or not, there are provisions dealing with the possibility of having multiple partners at the time of your death. In those instances, there is a default position that they will share in the estate equally unless an agreement is reached or a court orders otherwise. 
  • If you die without a spouse, your children will share in your estate equally. If any child dies before you, their children (if any) will receive the gift that would have gone to their parent. 
  • Finally, there are provisions dealing with what occurs if no one benefits from your estate under the above criteria. The gifts will go to your parents, grandparents, then uncles/aunts and cousins. The government will only benefit from your estate as the last resort if there are no family members to receive a gift under the rules of intestacy.

You will need a will if you want to deviate from the above rigid formula in any way.

Assets outside your estate

Prior to wrapping up this general guide, it is worth mentioning that certain types of assets do not ordinarily form part of your estate and therefore cannot be dealt with by a will. These include:

  • Jointly held assets: anything that is in a joint name (e.g. the family home, or joint bank account) will become the property of the surviving owner. 
  • Superannuation: your superannuation balance and death benefit does not form part of your estate unless the trustee of the superannuation fund elects to pay the proceeds into your estate. For this reason, the treatment of your superannuation forms an integral part of effective estate planning (having regard to the tax treatment of superannuation death benefits). 

Key Takeaways to remember

  • Your estate will be distributed in accordance with a strict formula if you do not have a valid will.
  • You will also lose the ability to decide who administers your estate, who is to benefit from your estate and make decisions as to guardians for your children.
  • A valid will allows you to record your wishes in a document that is legally binding.
  • When implemented as part of an effective plan, your will allows you to pass on your estate in a way which protects the assets and gives rise to very effective tax planning for your surviving spouse and other beneficiaries.

If you have any questions about your will and estate planning needs, please get in touch.