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Flexible Wills - Beneficiary in Business

People in business are always at risk of being sued. Often, business people (if properly advised), structure their affairs to protect their personal assets from claims.

If you have a beneficiary who is in a business, there are significant asset protection benefits in a Flexible Will. The benefits are highlighted in the following example.

Peter, John and Mary were partners in a business. Peter ran away with all of the business assets, leaving the business to flounder (and poor John and Mary to cope).

At the time that Peter ran away, the business owed $800,000 to creditors and was subject to a claim for $200,000 for an error made by Peter.

Both John and Mary's parents were on holidays together. Tragically, their bus crashed and they all died.

Will John's parents had Traditional Wills. John was left everything. Mary's parents had Flexible Wills, in which they established a testamentary trust for Mary.
Estate John's parents were reasonably well off - they left an estate of $500,000. Mary's parents were not as well off - they left an estate of $300,000.
Allocation of Estate The creditors of the business soon discovered John had received an inheritance. They quickly seized the funds, leaving John with nothing.  The creditors of the business discovered that Mary's parents had died. They tried to seize her inheritance, but could not do so, it was locked up in the testamentary trust.
Flexibility Unfortunately, John had no option but to wave goodbye to his inheritance.

The creditors of the business theatened Mary with bankruptcy. She had the choice of:-

- Going bankrupt (but protecting the inheritance); or

- Making a deal with the creditors.

Mary made a deal with the creditors under which she paid them $100,000 for a release.

Result All of the inheritance intended for John ended up in the hands of the business creditors. Poor John received nothing. $100,000 of the inheritance ended up in the hands of the business creditors. However, $200,000 was salvaged for Mary.