We have been happily married for 38 years in community of property. My husband and I run a business with our son. We have a will, but I believe that as we are married in community of property, our bank accounts will be frozen if one of us dies. How do we avoid that from happening because the business would have to continue operating?
Michelle Dubois, legal marketing specialist at Liberty, replies:
One of the most important factors to consider when running a business is continuity. In the event of death or disability of one of the key people in the business, it is vital that the operation is able to continue running successfully.
One of the ways to do this is to consider registering the business as a separate legal entity – for example, a company or close corporation. This will not only give you perpetual succession, but separate the business’ financial affairs from your personal affairs.
You will need to consult a financial planner or accountant to advise you on the different methods available so that you do this in the most tax-efficient manner. You will then be able to open a separate bank account in the name of the business.
The next step is to consider what will happen to the ownership of the business in the event of one of the shareholders passing away. You have already drafted a will, which is a crucial foundation of any financial plan.
Make sure your will includes mention of your shares in the business to avoid any confusion and uncertainty.
Remember that being married in community of property means your joint estate will be split in equal shares on your death. Your will then regulates who will inherit your share of the joint estate.
You may also want to consider taking out life cover so that the remaining business partners would be able to buy the company shares from the estate. This will ensure that the business continues to run unhindered and that the surviving shareholders are not burdened with financing the purchase of the shares.
A keyman policy can also be of value if there is one or a few key persons instrumental in running the business. If their absence will result in financial loss, this can be a blow for the business.
A keyman policy will ensure that there are funds available to the business to replace the lost skills and tide the business over while the transition is taking place.