If you advise business owners and Asian families on life, TPD, trauma or key person cover, this article is written for you. It looks at the legal side of the policies you arrange, and where an estate lawyer can help your recommendations work as intended.
The harder questions usually come after the sum insured is settled: who owns the policy, who receives the money, and whether the payment does what the family and business partners expect. For Asian families, policies may be held in different names, relatives may live in several countries, and the business may be run through a family company or trust.
Policy ownership and beneficiaries
Three roles are easily blurred: the life insured, the policy owner and the person entitled to the benefit. They may be one person or three.
Where a person owns a policy over their own life and has not nominated a beneficiary, the benefit is generally paid to their legal personal representative and forms part of the estate. It is then distributed under the Will or the intestacy rules, can be exposed to estate creditors, and is available to family provision claims.
Where there is a valid beneficiary nomination, or the policy is owned by someone else such as a spouse, company or trustee, the benefit may be paid outside the estate. That can be faster, but the Will does not control that money. A Will that divides the estate equally between three children will not achieve equality if a large policy is paid directly to one of them. The issue is not which option is “better”, but whether ownership and nominations have been checked against the Will and the wider plan.
Insurance inside superannuation
Much life and TPD cover is held through super. Those benefits are paid by the fund trustee under the fund’s rules and superannuation law, not under the Will. Binding death benefit nominations, dependants and tax on death benefits are covered in other articles on this site; the point here is that insurance in super belongs in the estate plan review.
Buy-sell agreements funded by insurance
When a co-owner of a business dies or is disabled, their shares or units may pass to their estate. The surviving owners may find themselves in business with a spouse or adult children, and the family may hold an interest it cannot easily sell. Insurance can provide the funds for a buy-out, but only a legal agreement transfers the interest. Without one, the money and the shares can end up with different people.
The buy-sell deed
A buy-sell deed typically deals with trigger events, the transfer mechanism, how the price is set and updated, what happens if cover is insufficient or a claim is declined, and how the deed fits with any shareholders’ or unitholders’ agreement, the company constitution or trust deed. Many deeds use put and call options rather than an automatic obligation to sell. The mechanism chosen can have legal, stamp duty and tax consequences that need advice.
Ownership structures
Policies may be self-owned, cross-owned, held by the business, or held by a trustee under an insurance trust. Each affects who receives the proceeds, how premiums are funded and what happens when an owner leaves.
Capital gains tax in general terms
Two CGT questions usually arise: whether the proceeds are taxed, and how the transfer of the business interest is taxed. Exemptions for life and certain illness or injury policies may apply, but can depend on who receives the payment and how the policy was acquired, so ownership changes need care. Under legislation passed in 2026, the CGT discount is being replaced by indexation and a minimum tax for gains accruing from 1 July 2027, which may affect future transfers. These are matters for the client’s accountant and registered tax agent, working with the lawyer.
Key person insurance
Key person cover protects the business, not the family, against losing someone whose skills or relationships drive revenue. Questions include who owns the policy, whether the purpose is to replace revenue or protect capital, and how that purpose is documented. The tax treatment of premiums and proceeds can depend on that purpose.
Offshore policies and equalisation
Some clients hold policies issued in Hong Kong, Singapore or elsewhere, which can raise Australian tax and foreign-law questions once the owner or beneficiaries are Australian residents. Insurance is also sometimes used to provide for children who will not inherit the family business. Both are covered in separate articles.
Insurance proceeds and family provision claims
In Victoria, a family provision claim is generally made against the estate itself, so proceeds paid directly to a nominated beneficiary may sit outside it, although the facts still matter.
New South Wales is different. Under the Succession Act 2006 (NSW), the Supreme Court can designate certain property outside the estate as “notional estate” to meet a family provision order. Depending on the facts and timing, this can extend to superannuation, jointly held property and insurance proceeds that passed outside the Will. Where a client has assets or connections in NSW, paying a benefit outside the estate may not put it beyond a claim.
When to involve a lawyer
Natural referral points include significant new cover, buy-sell or key person cover for a business with several owners, marriage, separation or a second family, and assets or family overseas. Each professional stays within their role: advisers do not give legal advice, and lawyers do not give financial product advice.
Questions to discuss with your client and their lawyer
- Who owns each policy, and who will receive each benefit?
- Do the nominations, the Will and any super nominations point in the same direction?
- Is there a signed buy-sell deed that matches the policies and business documents?
- Does the client have assets or family in NSW or overseas?
Frequently asked questions
Is life insurance part of the estate in Australia?
It depends on who owns the policy and whether a beneficiary has been validly nominated. A policy owned by the deceased with no nomination is generally paid to the estate; otherwise it may be paid outside it.
Do we need a buy-sell agreement if we already have insurance?
Insurance provides money but does not transfer shares or units. That needs a legal agreement.
Can a family provision claim reach life insurance in NSW?
Possibly. The NSW Supreme Court can designate certain property outside the estate as notional estate, depending on the facts. Whether that applies to a policy needs advice.
How we work with insurance advisers
We aim to complement your role, not replace it. You remain responsible for the insurance recommendation; we deal with the legal documents around it. Typical matters include reviewing Wills and nominations alongside new cover, preparing buy-sell deeds, and coordinating Australian Wills with Wills and policies in Asia. Consider two business founders who hold cover but have never documented what happens to the shares on death. The work may involve the deed, the constitution and each founder’s Will, and the right approach depends on facts that need advice. With the client’s consent, we report back so everyone works from the same plan.
Every family’s situation is different, and the answer often turns on details. Book a consultation so we can review your documents and circumstances before you act.
How Chua Tan Associates can help
Chua Tan Associates works with insurance and financial advisers whose clients are business owners and Asian families with interests in Australia and overseas. We prepare buy-sell deeds, shareholders’ agreements and Wills designed to work with the client’s insurance. Justin Chua trained in accounting (Bachelor of Commerce, accounting major), is an affiliate member of STEP (the Society of Trust and Estate Practitioners), and advises on the legal and tax structure of family wealth together. He is a Nationally Accredited Mediator and an Accredited Family Business Advisor. We work with the client’s accountant and registered tax agents, and with lawyers in Asia. We advise in English, Mandarin and Cantonese.
Important: This article is general information only and must not be relied on. It is not legal, tax or financial advice, does not take your circumstances into account, and may not reflect changes in the law after publication. Laws of other countries may also apply. Do not act or refrain from acting on the basis of this article. Reading it or contacting us does not create a lawyer–client relationship. Please book a consultation for advice on your situation.
Related reading
Chua Tan Associates acts for families, executors, trustees and their professional advisers in 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 or tax advice.
简体中文 
English (Australia) 
繁體中文