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Adviser Updates

Publications and Documents:

Publications and Documents


Business Succession Planning:

Business Succession Planning

Need for Succession Plan

Need for Asset or Buy/Sell Strategy

Need for Liability or Key Person Strategy

Negotiating a Succession Plan


Simple Succession Plan:

Simple Succession Plan


Complete Succession Plan:

Complete Succession Plan


Financial Needs

Insurance Funding

Retirement Funding


One Page Strategy:

One Page Strategy

Asset Needs

Liability Needs

Personal Needs

Who Pays the Premiums?

Valuing the Business

Simplifying the Valuation Issue

Equity vs. Loan Capital


One Policy Strategy:

One Policy Strategy


Dual Role of Personal Cover

Dual Role of Debt Red'n Cover

Security & Tax-Effectiveness

Cost Savings

Pre-Agreed Purchase Price

Apportionment of Premiums

Methods of Aggregation


Multiple Policy Approach:

Multiple Policy Approach

Super Fund Ownership

Tax Disadvantages

Cost Disadvantages

Other Disadvantages

Geared Premium Funding

Super Buy/Sell


One Page, Two Policy Strategy:

One Page, Two Policy Strategy


Other Issues:

Tax Deductibility

Inadequate Insurance Proceeds

Vendor Finance

Changing Needs

Future Growth of Equity

Trauma Buy/Sell Strategy


Sole Proprietors and Families:

Sole Proprietors and Families


Family Ownership

Sale Strategies

Third Party Buy/Sell Strategies

Estate Equalisation Strategies

Family Buy/Sell Strategies

Second Generation Strategies

Debt Reduction Strategies




Second Generation Strategies


When is a Second Generation Strategy Relevant?

A Second Generation Strategy is relevant, if any of the children (the "Second Generation") have acquired an Equity in the Business while it is still owned by one or more Parents.

It might also be relevant before any of the Children have acquired an interest in the Business.

The Second Generation has its own Succession Planning needs.

In many cases, it is possible to start working on these needs before they acquire ownership of the Business.


Ownership of Equity by the Second Generation

Subject to the comments with respect to Family Buy/Sell Strategies, it is not necessary to use Buy/Sell or Equity Insurance to fund any transfer of ownership of a Business or a Business Entity that will occur through the operation of a Will.

A Will gifts the Equity to the Beneficiary upon the death of the Proprietor.

Therefore, it is not necessary for an Owner to sell it or a Purchaser to buy it.

As a result, Buy/Sell Insurance is not required.

However, once the parents involve the Second Generation in the ownership or management of the Business during their lifetime, the children have their own Succession Planning and Insurance Needs.

They need strategies to deal with their own Equity in the Business and their Liabilities for the Debts of the Business.


Insuring Current Equity

If they own Equity in the Business or the Property, they require a Succession Plan in the same way as arm's length Proprietors.

In the case of a Family, their Equity could be sold to the other members of the Second Generation (i.e., any of their siblings who have an interest in the Business) or their Parents.

Their Spouse would receive Insurance Proceeds in exchange for a transfer of the Equity.


Insuring Future Equity

It is possible to design an Insurance-funded Succession Plan for the children, even before they acquire a substantive Equity in the Business.

For example, the anticipated value of any Equity they will acquire upon the Death or Retirement of the parents can be insured and "warehoused" in the Personal Component of the One Page, One Policy Succession Plan, pending the formal acquisition of the Equity.

Upon the formal acquisition of the Equity, the insurance attributable to the anticipated value can be re-allocated to the Purchase Price.

If the child were to die before they acquired any Equity in the Business, the Insurance Proceeds would be paid to their Estate as tax-free Personal Insurance Proceeds.

This strategy minimises:

  • the need to acquire new insurance when the parents retire or die; and

  • the risk that they might not be able to acquire the insurance because of health reasons.


Family Business Debt Reduction Strategies

Please read here with respect to Debt Reduction Strategies.


Copyright: Clover Law Pty Ltd



Adviser Tip

In the case of Retirement, a Complete Succession Plan can pre-agree the Purchase Price and specify a timeframe for payment.

If you do not have adequate insurance for an Insurable Event, your Succession Plan can specify a timeframe for payment of the shortfall.

See more Adviser Tips


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