Business - Wills
Beyond the benefits of a tax efficient Will it is important for the testator (that is the person making the Will) to ensure their business assets are efficiently structured during their lifetime to avoid problems after their death; Business Wills are specifically written for this purpose.
Our company and commercial solicitors can provide individual advice on the best arrangements for your particular business. Select which business applies to you below or the impact on inheritance tax.
In the event of the death of a sole trader, the Personal Representatives, as part of Probate and the administration of the estate, are required to take over the business.
Their options include selling it as going concern, continuing the business and holding it on trust for the deceased’s children, or closing the business down and disposing of the assets.
The Personal Representatives are the Executors named in your Will. They will be the persons applying for the grant of probate and administering your estate after your death on behalf of your beneficiaries.
It is important to consider who your Executors should be.
If you have a business or substantial business assets you should appoint someone you feel is conpetent to deal with the assets once you’ve passed away.
If you feel it is appropriate you can appoint separate specialist Executors who have experience of your business to manage the business asset. We can draft your Will to ensure your needs are catered for.
Business succession planning ought really to take into account a Will.
A Will can provide the Personal Representatives with flexibility when dealing with the business in relation to any other assets there may be in the estate following death.
For instance, a Will can specify that the business can be carried on by the Personal Representatives and other assets in the estate can be used to help support the business until an eventual sale. You can also leave a letter with your Will setting out specific instructions to deal with your business.
Lifetime succession planning in respect of partnerships can be crucial to ensure the surviving partners can effectively carry on the business.
If there is no partnership agreement in place the partnership may simply dissolve on the death of a partner, For a business with several partners this would obviously be a very unsatisfactory situation to be in.
A partnership agreement can give the surviving partners the ability to purchase a deceased partner’s share from the Personal Representatives of the estate based on an agreed valuation process.
Any partnership agreement ought to be carefully drafted so as not to create a binding agreement to sell in the event of death, which may have adverse Inheritance Tax consequences.
If you do have an existing partnership agreement we can review this to ensure it caters for the death of a partner.
Inheritance Tax is due on estates above a certain size.
It is chargeable at the rate of 40% above the ‘nil rate band’ at the time of a person’s death unless certain exemptions apply. It must also be paid before a grant of probate can be obtained.
Some business interests qualify for Business Property Relief (BPR) from Inheritance Tax on death. There can be a 50% to 100% reduction in Inheritance Tax depending on the circumstances.
For instance, a partnership interest in a trading company owned for two years before death ought to qualify for 100% relief such that the value of the interest is reduced to nil for Inheritance Tax purposes.
It is almost always necessary to apply for a grant of probate in estates involving business assets to arrange for the transfer of assets.
If a business asset holder is either married or in a civil partnership it is quite usual for any Will to simply leave all of their estate to their partner in the event of death.
If the estate contains business interests this would not make use of the Business Property Relief.
Any assets which are inherited by a spouse benefit from a complete exemption from Inheritance Tax on death but this can waste the potential further benefits of the Business Property Relief.
It may be more tax efficient to leave all of the assets in the business to a specific trust. The spouse or partner can still benefit from the business during their lifetime but the business will not be deemed to be part of their own estate on their death.