Planning for your business after your death

Too often I see business owners assuming that it is the right thing to do just to let the business fall into their estate at death, “just pass to the wife/ husband”.  This usually means they have not had the appropriate discussions nor the correct advice for them and their circumstances.  This could end in disaster for their business, their widow and their family. Also, why wouldn’t you protect your life’s work?

The ramifications of poor planning for your business in a Will is too detailed to cover fully in this blog but here are a few tasters.

If your business a sole tradership

Do you have business continuity clauses in your Will?  If you don’t, then your business assets will require a Grant of Probate, along with the rest of your personal assets.  This means those assets are frozen until a grant is produced and this can take many months.  Would your business survive being frozen for that length of time?

Without continuity clauses, a sole tradership can only be sold or wound down and cannot continue to trade.

Contracts of employment cease at your death, can your business run without staff?

If your business is a partnership

If nothing is pre-stated, your partnership ends at your death as one of the partners is now no longer acting. Action now needs to be formulated as to how the “new” business carries on.

If your business is a Limited Company

If there are no directors as you were the sole director, your estate now needs a grant of probate, and your executors will have to appoint a new director to run the business in the meantime.  Do your executors realise this and understand their responsibility

However, the missed opportunities of not having those bespoke discussions about the business you have worked so hard for many years are

• • What happens to the business at your death – 
    • is it sold
    • Can you be replaced with putting another manager in 
    • MBO?
    • Continuity plan
  • Do you have certain members of the family in the business and not others, for example, has your daughter worked in the business and been involved in running it but your son hasn’t? So, do they benefit equally from the business or not and does the other child get compensated?
  • Business Property Relief – does the business qualify?  Is it trading or investment?  Does it comply with the wholly or mainly rule?
  • How much cash is in the business?  How much can be seen as working capital?
  • Do we need to utilise the business for inheritance tax planning?
  • If your spouse inherits the business, what if they remarry/ go into care?
  • Does your spouse need an income?
  • Will the business value affect your residence nil rate band at first and/ or second death?

ALL businesses need a disaster plan, but this is often thought to have to do with natural events, or supply issues, or even cyber-attacks for example. However, your death could constitute a disaster for your business and all related to it, your staff, the stakeholders and your family members.  Therefore, it is vital to incorporate this in assessing risks for the business.

Don’t assume you don’t need to plan for your business at your death.  Have an informed discussion and plan accordingly. Act now before your life’s work is wasted.

As always, we would be delighted to talk this through with you so do email us on office@hamiltonlegacy.co.uk or call the office on 0191 406 0747.