Estate planning: whoever says it’s easy is lying.

Have you thought about how your professional and personal life overlap regarding tax? Estate planning for business owners is an area of finance that often gets overlooked.

It’s vital to keep your estate plan up to date, especially if you’ve undergone family or business changes. Taking the time to get things under control means leaving your loved ones and beneficiaries with a far easier job when you pass away.

This is especially important as a business owner – how do you want to leave things? Have you thought about your succession?


Choosing a successor

When organising your affairs, it’s vital to know exactly what you want to happen with your business – whether this means passing the ownership to a family member, a business partner or dissolving the company entirely.

If you haven’t made this decision, you need to know this before proceeding – especially if you want to avoid any legal issues for your successors.

Only 34% of businesses have formalised succession plans – with many owners hitting retirement age in the next decade, this is vital to stay on top of and maintain your control over.

A proper succession plan will cover all eventualities – your death, your inability to run the company, etc.

It will give a clear pathway for who will run the business when you leave and outline, along with your estate plan, just how you want to split your responsibilities to avoid any confusion.

Once your succession and estate plan are in good order, you can begin planning the transition period and split up your estate accordingly.

You’ll need to make sure that your family-owned business is left with no confusion – it’s very common for one child to want to take over a business, with others showing little interest.

It’s worth taking the time to understand what options are available to you, talking to your family and assessing to get the best option for everyone. Sometimes this may mean leaving someone out, but ultimately it is your wish, and they should be respected.


Make a will

To avoid intestacy laws and all the legal wrangling that goes alongside that, it’s vital that you write a will.

Normally, your assets will go to your spouse or children, but this can be different if you have neither or want something else to happen. If you’re passing on the business, you need to make sure to clearly outline how you’d like your assets and business shares to be distributed to avoid confusion, and to allow your wishes to be carried out efficiently.

After a will has been written and you’ve passed on, probate will need to be granted. This isn’t something we can help you with but get in touch with us for a recommendation based on your situation.


Get a lasting power of attorney

Should you fall too ill to make your final decisions on your own, a lasting power of attorney will be able to act in your stead. It’s vital to get this appointed before you actually get ill.

If you were to lose mental capacity due to an illness, you’d have your assets frozen and automatically lose your place on a company board, so if you hold significant wealth and power, it’s vital that you have someone who can speak for you.

If not appointed before it comes to it, the legal fees and financial ramifications can eat away at your family, sometimes taking months for a court to appoint an appropriate attorney. It’s best avoided for everyone’s sake.


Set up a trust

A trust is another useful tool to consider if you want to pass on your assets to a beneficiary without them becoming involved in the day-to-day running of a business.

They could still benefit from shares directly via dividend income but not actually do anything within the business itself. This would leave the business to be run by your co-workers rather than a family member being thrust into the fold.

If you become ill, a trust is also useful as you can pass your control to the trustees (in this situation, they’d likely be your fellow business owners), and your business will continue to earn money for you and your family.


Stay tax efficient

If you structure your will correctly and place your shares in a trust, you could receive a 100% tax relief from Inheritance Tax via the Business Property Relief.

This might mean developing an estate plan that takes advantage of these tax planning opportunities, something we’d be happy to discuss with you.


Set up a cross-option agreement 

When there are multiple owners, your shares can become a complicated web to navigate. That’s why the cross-option agreement exists.

Here all the shareholders will have an agreement with the private limited company, with each shareholder given the right to buy their shares in the event of their death. The sale can be funded through life insurance policies, for example.

This means no new shareholders and provides your beneficiaries with income.


Get organised and stay updated

It’s vital that your records and documents reflect your current operation state. So make sure you have all the appropriate paperwork in good working order.

Let your family and business partners know where to access them, and of course, show them what needs to be done in the event of your death.

Your business plans, estate plans, and succession plan should all be updated as part of this – especially if there has been a change in legislation.

Whether you’ve changed partners recently or had a grandchild, it’s always worth updating your plan accordingly, especially with the constant inheritance tax changes.


Talk to us

There is so much to consider when planning your estate as a business owner, but you don’t need to be in the dark forever.

Get in touch with us today to discuss your next steps.