Succession Roadshow - RCS Article

Posted by: Kylie Wilson

The RCS Succession & Continuity Planning Roadshow in central Queensland took place at the beginning of this year. Claudia Power from RCS has posted an article in their latest newsletter "How to run an effective family succession meeting" including my comments.

Click here to read more.

Have you reviewed your industry or public superannuation fund's policy in relation to death benefits recently?

Posted by: Kylie Wilson

Under superannuation legislation, if you do not have a valid binding death benefit nomination that directs the trustee of an industry or public superannuation fund as to where you want your death benefits paid from that fund on your death, the trustee has a discretion to make payments to any one or more of the following:

1. your spouse;
2. your children;
3. financial dependents;
4. any person with whom you have an interdependency relationship; and
5. your legal personal representative (your estate to be dealt with in accordance with the terms of your Will).

However, in recent times public funds have been changing their policies in relation to how they deal with a member's death benefits.
For example, Zurich recently notified members that although Zurich would previously decide who, of a member's dependents and legal personal representative, would receive a member's death benefits not covered by binding death benefit nomination, their new policy from 1 July 2016 will be that any part of a death benefit not covered by a binding death benefit nomination valid under superannuation law at the time of death will be paid to the member's estate. This policy already applies to new members from 21 December 2015.
Further, if the estate is insolvent, or if the legal personal representative cannot be identified within six months, the benefits will be paid to spouses, or, if there is no spouse, to the member's children, with payments made in equal shares where applicable.

Zurich is therefore changing its policy, where there is no valid binding death benefit nomination at the time of death, to specifically prescribe where the death benefit will go, which may not be the best outcome, particularly in circumstances where the estate may be subject to a family provision application after the member's death. 

It is essential therefore that members of public and industry funds understand the current policy of their public or industry fund in relation to how their death benefits will be paid to ensure that the treatment of those death benefits aligns with their estate planning aims.

For further information, contact Kylie Wilson or Kylie Shaw.

Rural Succession Planning - Where to start?

Posted by: Kylie Wilson

I had the privilege of being included in the succession and continuity roadshow in central Queensland, organised by RCS, for the purpose of providing information to primary producers on the best options available to ensure smooth succession and ongoing continuity and viability of their intergenerational businesses.

An interesting part of each section of this roadshow was an exercise that was run and facilitated by Claudia Power of RCS, where each generation was split into two groups: those that consider themselves part of the "older" generation and those that consider themselves part of the "younger" generation.

Effectively, regardless of age, the older generation being those that currently control the business, and the younger generation being those that are working in the business with an aim to ultimately succeed to control of that business.

What was interesting out of that exercise was that in each of the three sessions that were conducted in Emerald, Biloela and Rockhampton, two main themes came through from both generations as their main priority:

1. family harmony; and
2. financial security.

So both generations' top two priorities from each of the sessions by and large exactly mirrored each other.  Why then are there so many difficulties with rural succession being completed in a way that ensures that families both stay together and stay on the land?

There are many answers to this, depending on each respective business and the dynamics of each respective family.  Having said that, one overwhelming issue that came up again and again from both generations was communication.  The older generation not always expressing to the younger generation the status of the business, the liabilities, the exact nature of the income and expenses and how the business is conducted as a whole.  The younger generation not communicating their expectations, their thoughts and ideas on growing the business or their desire to know more about the ins and outs of the entire business.  In failing to communicate these things, each generation is disadvantaging the business by removing from the business two important elements:

• the passing on of wisdom, in a way that occurs over time and in an educated fashion, and allows a younger person to grow and develop in, and with, the business; and
• a loss of the injection of youthful enthusiasm and ideas into the business.

While these problems are not always universal, it is also not uncommon for parents to focus very much on growing the business in a way that they think will benefit the next generation, with little long term planning given to how their retirement will be funded when they exit the business.  In addition, children often want to try to meet what they see as their parents' expectations, without ever actually asking their parents what their expectations in fact are, or expressing what the children actually want.

Therefore, what was clear from the succession roadshow is that the very first step of any succession planning needs to be for all parties involved to identify first and foremost as individuals what it is that they want, both in the business and in life.  Without an understanding of what it is that they want, it is impossible to appropriately plan for it, and ascertain whether what is wanted can be achieved during the succession process.  You cannot set goals to achieve anything in life without knowing what it is you actually want to achieve. 

In summary then, the best approach to starting a succession plan for rural families is for each family member to identify what it is they want and communicate that, openly, honestly and without judgment,  with all the stakeholders in the business.  Then a flexible plan can be put in place to achieve the aims that work for everybody if those "wants" are achievable.  The more planning, time and communication that is put into the succession process, the more likely that the two main aims of family harmony and financial security will be achieved.  Ultimately, each generation wants the same thing, and with proper communication and planning, achieving that does not need to be difficult.