Buy Sell Agreements

Buy/Sell Agreements or Put and Call Option agreements (as they are also referred) are agreements used in the context of business succession to allow for an equity holder’s (Equity Participant’s) estate to be paid out in the event of the their death or disablement.  They are commonly used in conjunction with an appropriate policy of insurance (Insurance Policy) to provide certainty for a business on the death or disablement of an Equity Participant.  It is not usual for Security Holders Agreements to deal with the death of disablement of an Equity Participant as their scope is usually limited to the operation and control of the Enterprise.

Buy/Sell Agreements can be used in a wide variety of entity types where a few Equity Participants hold the majority of the equity in the business (Enterprise).  A Buy/Sell Agreement is applicable where the equity held in a variety of business structures including (but by no means limited to) traditional partnerships, a unit trusts, a proprietary company or other hybrid form of entity.

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What is a Testamentary Discretionary Trust and why would I want one?

A traditional will leaves the estate to the beneficiaries equally, and contains further instruction in the event of the beneficiaries predeceasing the testator.  It may also contain specific bequests requests relating to the testator’s personal property.

This will, while effective an effective estate planning tool for those in uncomplicated circumstances, leaves the inheritance open to the creditors or ex-partners of beneficiaries in the event of financial difficulty or relationship break down.  There are also be adverse tax implications if a beneficiary invests their inheritance; if the beneficiary is earning other income, the income from the estate investment is taxed in addition to the beneficiary’s marginal tax rate. [Read more…]

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