A will has always been a job that you think you’ll only have to tend to when you reach a specific age, certainly when you’re much older anyway. Planning on what will happen if you pass is hardly the most cheerful of subjects but if you do run your own business that it is something you definitely need to be thinking about getting draw up. The reason for this is because without one, all of your assets may not be distributed in the way you would want them to be. A business is a whole different story when people pass compared with an ordinary death, it’s not as simple as a certain possession not going to the right family member.
Whilst the majority of people believe that all of their assets and possessions will automatically be divided up between their loved ones, this is often not the case. With no set will in place, the reality is that the law takes control of your belongings and they ultimately dictate how they are divided, so it’s worth thinking about not just for you but your family.
It is not unheard of to have your family home sold after your death to cover your business expenses and that reason alone is a worrying concept. Things become even more complex if you own a business and also have business assets. According to a recent study, It’s currently estimated that almost 1 in 10 business owners believe that their business would have to cease trading should one of the key individuals in the business pass away. This is a result that could affect the tens to hundreds you may employ, which seems highly unnecessary when your business can be easily mitigated if the circumstance occurred. All it needs is some calculated planning. Say for example you’re the head of an owner-dependent business, your unfortunate death could have significant consequences to the business that you’ve spent years growing.
What is worse is that an increasing amount of businesses have sadly had to stop due to a legal battle following a passing. If you took the case of a family business, that employs the owner’s children and they were to die – currently the law states that without the presence of a will, the business would then be equally divided out between all the owner’s kids. As a result, the child (the only one who actually worked at the company) would have to buy out their brothers or sisters in order to take control of the business, an eventuality that causes messy and drawn out will disputes and severe emotional stress on your loved ones.
If you do own a family company and it isn’t in your wishes to pass on your business to your family – maybe because you have partners or other separate critical figure heads within your setup – arranging for each business owner to take out a life policy in trust for the other business can protect that scenario. By doing this, any set funds will be paid out straight to the surviving owners in the case of a death, so that they can buy out your share of the business.
When it comes to writing a will, you should look closely into succession planning. The reason behind this is to maximize the benefits of Business Property Relief. This gives relief from inheritance tax for businesses, for which you will need to be extra careful and accurate about when it comes to your planning. As an example, if your spouse were to gain control over your business and then they decided to sell it on, the profits from the sale will then be counted as part of the estate and it will be subjected to inheritance tax when they die. From a financial standpoint, it makes more sense to hold onto the shares but pass over the company to a trust. Your spouse will still benefit from the trust but it simply means that they won’t be hit with inheritance tax.
To summarize, you can easily see that running a business comes with its complications before and after you die. Too often people wait till they become ill or grow old but that is an organized way of operating a business in the modern world we live in. Having a will in place is there to cover you for the possibility of an unfortunate sudden or early passing, not to mention its necessity if you’ve just been recently married or have children. It’s always a smart idea to be prepared for any circumstance should the worst happen so it is more beneficial to start thinking now about how your business could be divided up. If you’re unsure on how to proceed, it’s crucial to seek help from dispute resolution solicitors to ensure you’re clear on what to do and also completely covered whatever the outcome.
About Veronica Pembleton:
Veronica Pembleton is a freelance writer and research journalist, who specializes in a number of core areas, including freelancing and well law and business. Through studying journalism at university, Veronica was introduced to a number of contacts in different industries, where she was able to build her portfolio of feature articles.