Preparing a will can seem daunting enough to most people. Nobody wants to think about what will happen when they die. But it’s a fact that if you’re an adult and you have assets: you need a will. Throwing a business into the mix only increases the number of issues that need to be considered.

Many business owners have enough on their plate running their business leaving little opportunity to give proper thought to writing a will.

Here, we will give you a brief overview of everything you need to do as a business owner to protect your family and business. Clue: You need a will.

Why do you need one?

If you own all or part of a business, you should have a will. Otherwise you run the risk of your shares being distributed under the laws of intestacy – and your loved ones will have no say in it. This is especially important as a business owner because it’s likely most of your family’s income is tied up in your business, leaving them with little income.

In brief, with a valid will you:

  • Control how your estate is distributed
  • Control who inherits your business
  • Minimise Inheritance Tax
  • Prevents disputes and reduce stress on your family

The importance of forward planning

It’s important to start planning and putting together your will sooner rather than later as a business owner because there’s a lot of planning and decisions to make. As a business owner, writing a will is more than deciding who will inherit your estate.

The first thing you need to decide is where you are planning to pass your business onto the next generation or sell your business and distribute the proceeds.

If you are planning on passing on your business, you’ll need to consider:

  • If your business structure allows it
  • Who will take over and whether they have the experience and knowledge to do so
  • If it is worth passing on shares to reduce Inheritance Tax

If you are planning on selling your business, you’ll need to consider:

  • Who will manage your business whilst it goes through the sale process?
  • Is there enough money in the business to keep in running until the sale is completed?
  • Does a buyer need to be found and if so who will find them?  Will your partners be buying your shares – do they have enough money to do so?

Reducing your Inheritance Tax liability

Forward planning is also vital when it comes to reducing the Inheritance Tax (IHT) liability.

Here’s an overview:

  • Gifts between spouses are free from IHT
  • There is an IHT threshold of £325,000. Assets exceeding the threshold will be taxed at 40%
  • Business Property Relief (BPR) is a relief from IHT of 50% or 100% for relevant ‘business property’

Including a discretionary trust in your will

If you feel uncomfortable about leaving business shares to your children and grandchildren, you should consider including a discretionary trust in your will. This basically means making a gift of your shares into a trust.

This means it:

  • Is flexible – You will choose who your trustees are, and it is for them to decide when to give the shares to your beneficiaries. It’s a good idea to hire an accountant or solicitor to be a trustee, as they will remain professional and neutral to reduce the changes of any family conflict arising
  • Maximises business property relief
  • Keeps your options open in relation to forward planning for your business

If you would like more information or would like to arrange an informal discussion, get in touch with our sister company A4G Legacy. They can guide and support you through the whole process from start to finish, when you need it most.

Want to find out more?

Call us on (01474) 853856 and we will put you in contact with one of our advisers, or send us an enquiry by clicking below.

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