Covid-19 has forced many business owners to take action
Our new clients often tell us ‘Make my Will’ is something that has been languishing on their to-do list for months, and in some cases years. Juggling home life and running a business make it difficult to prioritise something that you might consider morbid. Superstitions and taboos stop us taking action. Living now is the priority. I’ll do it when I’ve retired… next year… after the wedding… when I come back from holiday…
If you are in business with other people, you should consider your estate plans together. If one of your co-business owners were to die unexpectedly, your livelihood and the livelihood of those that depend on you could be at risk.
Executors can be appointed in your Will to ensure the running of the business if you were to die prematurely. It’s important that it continues to be run by someone with appropriate experience and skill. You may want the business to continue to be run by your co-owners and to pass to those people who are involved, have knowledge of the business and share the same vision. You should also consider a Lasting Power of Attorney for Property and Financial Affairs for your business, with an appropriate person stepping in temporarily or permanently if an accident or illness means you are unable to work.
Who benefits from your success?
Aside from appointing people to run the business for you, you can also name who should benefit from your business (and the remainder of your estate). If you die without a Will, the intestacy rules set out who should inherit, with some surprising results. For example, if you are married or in a civil partnership, your personal wealth is greater than £270,000 and you don’t get round to making your Will your life partner may not inherit all of your assets.
Business property relief
Your Will can be structured to make the most of business property relief and be as tax efficient as possible. Business property relief could mean your business passes 100% inheritance tax free, this valuable relief can be lost without proper planning.
Whether you are a sole trader, partner, director or shareholder of a company without a Will, there are some important risks to consider. Dying intestate could mean that the business:
- falls on your family, leaving them to handle the administration of your estate when they are dealing with personal loss
- risks delays, as no-one has authority to deal with the business until a grant of probate has been obtained from the Court, which can have a detrimental effect on the business
- is owned by your spouse or family members leaving the remaining business owners with conflicts and uncertainty
- is inherited by young children, which may make it extremely difficult for the business to continue
- has to be sold, if the beneficiaries don’t want to carry on running it
- risks being devalued and sold at a lower price than anticipated. This can happen, especially if there are pressures to sell quickly and the business is not being well-managed during the period leading to the sale.
Peace of mind
When reviewing your Will, consider the structure of your business and the relevant business documents at the same time. Make sure that you know what would happen to your share of the business on your death and consider making changes to reflect your wishes.
If you are in business with others, either via a partnership or company, it may be worth checking if your co-business owners also have a Will in place, as this may have an impact on your business if any of them die prematurely or unexpectedly.
A partnership agreement is essential if you want your partners to have the option to buy your interest and continue the business.
Limited companies articles may affect how shares pass on death. It’s important that company documentation ties in with your Will.
To find out more about making a Will that includes your business or to book your appointment, use our contact form to get in touch: https://www.carismawills.co.uk/contact/
Our blog author, Donna Hames, is an affiliate of the Society of Trust and Estate Practitioners, a full member of the Institute of Professional Willwriters and chose to specialise in estate planning following her LLB Hons law degree. With a former career in financial services, compliance and audit, Donna is Carisma Wills’ principal, a paralegal and director; she is well-known in the local area as a swim coach and charity volunteer.