Inheritance planning: five questions for business owners
Sarah Cornish, Partner and Head Wills, Probate and Trusts at Coodes Solicitors, highlights some key inheritance planning considerations for business owners.
Many business owners separate out their wishes for their private and business assets. However, when it comes to planning for the future, tying the two together is vital. It is common to assume that because a Will is in place, everything is in order. However, there could be an important missing link.
1. Do your company articles fit with your Will?
An experienced corporate lawyer can examine your company articles and your Will to ensure they fit together. If you do not take this step, the wishes you have set out in your Will may not in fact be possible because of the way your articles of association have been drafted.
Once they are in place, it is important to keep these documents under review and ensure they remain up to date as your business and personal lives change.
2. Do you need a Business LPA?
In addition to ensuring your will and articles of association work together, you may wish to put in place a Business LPA. This would enable a trusted individual to act on your behalf should you become unable to do so.
3. Have you made a decision on succession planning?
When considering inheritance planning, business owners should focus on succession planning. It is important to decide to whom you wish to leave the business. Many people look at succession as something that will happen many years or decades into the future. The truth is that none of us knows when these plans will become reality.
Whatever your age, if you own a business, it is important to consider who you could involve now at a management level.
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4. Do you know what will happen to your business shares if you die?
When we are making a Will for a business owner, we always check that the company documentation sets out what will happen to shares in the business on death. For example, there may be provision for the surviving shareholders to purchase the deceased shareholders’ shares.
5. Could your business run without you?
A well drafted Will for a business owner will widen the powers of trustees so that they are able to deal with a business interest. For example, they could be given the power to delegate authority and allow loans to the company to remain temporarily outstanding.
The key thing is not to assume it will all be OK. There have been many instances when business partners or family members have been left in dire straits after a business owner has died or lost capacity. I reflected on a difficult case, which followed the death of a business owner, in another blog with my colleague Kirsty Davey.
Irrespective of the size of your business, don’t leave inheritance planning to chance. Get advice and put a plan in place.