Not many people think about writing a will until they reach a certain age. While it may not be the most joyful thing you can do – let face it, it’s quite depressing to dwell on what will happen after you die, if you own a business you may seriously have to start thin king about getting one written. Without one, all of your assets could not be distributed how you’d like. When it comes to a business, it’s not as simple as a certain possession not going to the right family member. Not having a will when you own a company could literally be as devastating as say, your family losing your family home.
While many people assume that their assets and possessions will automatically be divided up between their loved ones, this is a pretty naive stand point. With no will in place, the law takes control of your assets and dictates how they will be divided.
This could literally mean your family home could be sold to settle expenses, a pretty worrying prospect! Things can get further complex if you own a business and business assets. It’s actually estimated that around 1 in 10 business owners think that their business would have to end trading of a key member of the business pass away. This seems so unnecessary when it can be easily mitigated with some cautious planning.
If you’re the head of an owner-dependent business, it is really significant that you have a will in place so that your death won’t affect or damage the business.
It’s surprisingly common for businesses to meet their end because of lengthy legal proceedings following a death – all of which could be avoided. For example, if it is a family own business which employs one of the owner’s children and said parent owner dies, the law states that without the presence of a will, the business would have to be equally divided between all the owner’s children. If this happens, that child would then have to buy their siblings out to take control of the business, which can lead to needless will disputes and emotional distress for your loved ones.
If you do own a family company and you don’t wish for your family to inherit the business, as you have partners or other critical figure heads within the organization, arranging for each business owner to take out a life policy in trust for the other business owners can protect that. With this, this any funds are paid directly to the surviving owners should one of them die, so that they can buy out your share of the business.
Succession planning is undoubtedly the most important aspect of writing a will if you are a business owner. In order to maximise the benefits of Business Property Relief, which provides relief from inheritance tax for businesses, you will need to be careful and strategic in your planning. For example, if your spouse takes control of your company when you die and then sells it on, the profits from the sale will then be counted as part of the estate and will be subject to inheritance tax when they die. This why it makes better financial sense to keep the shares, but hand over the company to a trust. Your spouse will still benefit from the trust, but won’t have to pay the inheritance tax.
As you can see, owning a business come with extra complicated issues – even after you die! Being elderly or developing an illness is certainly not the only time that someone should think about writing a will. Other reasons, apart from being the owner of your own business include if you get married, enter a civil partnership, or have children. Even if you’re not any of these, it’s a good idea to start thinking about how you’d like your assets to be divided, should the worst happen. If you’re unsure what to do, it is always crucial in this situation that you speak with dispute resolution solicitors to ensure you’re completely covered whatever happens.