Succession Planning for Business Owners
A Will makes sure your wishes are carried out once you have died. It can be easy to put it off, but the process is not as complicated as you may think.
The benefits of making a Will are:
To provide for your family and friends – making a will ensures that your assets are left to those of your loved ones that you specifically wish to benefit. The only way to include friends as beneficiaries of your estate is to make a Will.
Make a gift to charity – Making a cash gift to charity is not only inheritance tax exempt but is a good way for you to make provision to charities close to your heart.
Reduce tax liabilities – A will can be structured in such a way to make use of various tax exemptions. A matter of some importance in deciding what to do with your business when you die is the question of inheritance tax (IHT). The rate at which the business will qualify for relief may be a deciding factor on its destination. Business property can carry 100% relief from IHT. However, not all businesses will qualify for this. When preparing your Will we will look at the IHT position.
Prevent Stress & Worry – When families have a will to follow that sets out wishes, such as funeral arrangements, this takes the stress away at a difficult time. It also prevents worry about what may happen to your assets.
When making a will you need to consider who will carry out your wishes. Those people are called your Executors and become Trustees if your estate is to be held in trust for any period of time. You should trust who you appoint completely.
Apart from the family home, your business may well be your most valuable asset either in terms of its actual cash value or its importance as an income-earning asset.
As such it is necessary to establish whether your business has procedures in place for continuation after your death. We can assist you with these aspects when making your Will to ensure that your business passes in the right way to your beneficiaries, for example a partnership agreement should provide for the continuation of the partnership in the event of the death of a partner and, if applicable, contain an option for the surviving partner(s) to purchase a deceased partner’s interest in the partnership together with the basis for valuation and payment to beneficiaries.
We can advise on structuring your Will fairly, particularly in cases of a small family company which you may run with a family member such as a child who is willing to continue the company and you have other children to consider.
We recommend reviewing your Will at least every 3-5 years to ensure that your wishes remain the same.
Lasting Powers of Attorney
There may come a point in the future when you are unable to manage your own affairs. This may occur at any stage in life and may be brought on by physical illness, mental illness or simply old age. To avoid uncertainty and ensure that your affairs are in order, you should consider making a Lasting Power of Attorney (LPA).
There are two types of LPA:
- A Property & Financial LPA allows you to appoint one or more people (your attorneys) to manage your finances and property. This will allow your attorneys to deal with day-to-day correspondence, obtain money for your use, collect your benefits, pay your bills and sell or rent your house. You can appoint your attorneys to look after matters whilst you still have capacity.
You may well need a separate Property & Financial LPA dealing specifically with your business. (Please see Business LPA leaflet).
- A Health & Welfare LPA allows your attorneys to make decisions regarding your personal health and welfare. This could include making decisions about your day to day care, medical treatment and whether you should go into residential care. It can also give attorneys the right to accept or decline life sustaining treatment.
We would advise you to choose people who you completely trust as your attorneys. Most commonly you would choose your spouse, civil partner or partner, a family member, a close friend, a professional, such as a solicitor.
You can appoint one person to act on your behalf or name more than one person and specify different areas that each can make decisions about. You can also specify that decisions should be made jointly by both attorneys if that is your preference.
If you do not have an LPA and you lose mental capacity, many problems can arise. If this situation occurs it may be necessary to make an application for a deputyship order via the Court of Protection to enable someone to act on your behalf and administer your affairs.