By Justin Chua, lawyer and mediator, Bachelor of Commerce (accounting)
I trained in accounting before I studied law, and I have run businesses with their own profit and loss statements. Accountants and lawyers often look at the same family and see different things. You see the general ledger, the cash flow and the ratios. A lawyer often sees only the will and the deed. A good estate plan needs both.
What the numbers tell an estate lawyer
- Loan accounts. A founder’s loan account in the family company may be one of the largest assets in the estate. Is it to be called up, forgiven, or left to one child? Each choice moves value between beneficiaries.
- Unpaid present entitlements and Division 7A. Amounts owed between trusts, companies and family members carry tax consequences. A will that ignores them can create a tax bill, or a dispute, nobody expected.
- Retained earnings and franking credits. These affect what the business is worth to each child, and how equalisation should be calculated.
- Cash flow. Can the business afford to buy out a sibling, pay a widow’s income, or service a loan to equalise inheritances? If not, the plan is not real.
- Ratios and covenants. A change of control on death can trigger a bank’s review or breach a covenant. The bank’s facility agreement is part of the estate plan.
- Related-party transactions. Rent paid by the business to the founder’s property trust, salaries to family members, and personal expenses run through the company. All of these become questions after death.
Why it matters to your clients
A family business is not just an asset. It is usually the family’s main source of income, its identity and its biggest risk. A corporate lawyer understands the company. A private client lawyer understands the family. The plan has to work for both, and it has to work in the accounts.
How we work with accountants
- We read your financial statements and structure charts before we advise. We ask the questions an accountant would ask.
- We design the wills, trusts and succession arrangements around the actual numbers, and test them with you.
- After a death, we work through the loan accounts, entitlements and final returns with you, so the estate and the structures are wound up in the right order.
- We speak with the family in English, Mandarin or Cantonese, and translate the numbers into decisions they understand.
Chua Tan Associates advises families, executors, trustees and their professional advisers on estate planning, estate administration and estate disputes, in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal advice. Victorian law unless stated otherwise.
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