Home Business Insights & Advice Five things to consider when leaving your business assets in a will

Five things to consider when leaving your business assets in a will

by John Saunders
4th May 22 11:19 am

If you’d like to include your business assets as part of your Will, there are many things that you should be aware of. In this article we’ll discuss the most important things to consider.

You may already have some idea about who you’d like to run your business, or leave your shares to, when you die, whether it’s an employee or a family member. Unless you draft a Will, your business may be passed on to someone who doesn’t have the skills or the desire to run the company.

If you operate your business as a sole trader, any business assets you have will be passed on to your Will executor. When you pass away, the executor will then distribute your company assets amongst your beneficiaries, as per the instructions of your Will.

If you’d like to include your business assets in your Will, it’s important to seek legal support. Unless you think carefully about your options, disputes are likely to arise, causing problems for your loved ones left behind. Your chosen beneficiaries may even need the advice of contentious probate solicitors if things get out of hand.

Drafting a Will can be confusing, particularly if you have plenty of assets, savings and property. When you’re leaving your company as part of a Will, there are many things that you should be aware of. In this article, we’ll explore some of the things to consider…

What to consider when leaving your business assets in a will

1 . Disputes that may arise

If you’re considering leaving your business assets as part of your will, it’s important to be aware of potential disputes. Some disputes may occur if:

  • You have decided to leave the company to someone, and that person does not wish to carry on with the business once you have passed away.
  • The shareholders do not want to work with the chosen beneficiary.
  • The shareholders disagree about selling some shares to a third- party.
  • If the shareholders do not have the necessary funds to buy the deceased’s shares.

Before you write your Will, it’s helpful to seek legal advice. Doing so can help you to consider the disagreements that may arise, helping you take precautions to avoid these disputes. It’s vital that you think very carefully about who you leave your business to, ensuring that you’ve chosen the right person with the desire and skills to run the business.

2. Issues of inheritance tax

Before you include your company or business assets as part of your Will, it’s important to be aware of issues of inheritance tax. Under most circumstances, businesses should be entitled to Business Property Relief.

To qualify for Business Property Relief, certain criteria must be met. For instance, the deceased needs to have owned the asset for at least two years, and the company must be utilised for commercial gain.

Some types of businesses are not eligible for relief, for instance, residential property companies. Businesses owners can access either 100% or 50% relief, depending on the circumstances and type of business.

3. Check your agreements and business documents

If you’d like to pass on your business or shares to a family member, you’ll first need to check the terms of your shareholders or partnership agreements. It’s vital to check the details of these documents, as there may be terms in the shareholders agreement that affect your rights or have impact on your decision.

The type of company that you run may influence the business Will processes and rules. For example, if you own a limited company, you’ll need to check the Articles of Association. Here, there may be details about what should happen to your share of the company when you pass on.

If your business is part of a partnership, you’ll need to check the terms of the partnership agreement before making any decisions. Unless you check your agreements and obligations, you could end up drafting a Will that contradicts your obligations. It’s vital that you understand what you can and cannot do with your business assets.

4. A discretionary trust

You might choose to put your business into a discretionary trust. When you pass away, your business assets will be transferred from the trust to your chosen beneficiaries. There are many benefits of using a discretionary trust, including:

  • Discretionary trusts are a flexible option.
  • Can offer protection in the event of a marriage breakdown.
  • Ensure that the business assets are not sold outside of the family.

Zero Creatives / Avalon

5 . Getting the support of a solicitor

If you’d like to leave your business assets in a Will, it’s essential to get the legal advice and support of a solicitor. A solicitor can guide you, ensuring that you are leaving your assets to the correct person, and that you understand the implications and processes associated with your decision.

Unless you draft a clear Will, your business may be passed on to a person who does not have the skills to run it. Your solicitor will be able to talk you through the inheritance tax processes and explain your options.

Leaving your business assets in a will?

As you can see, there’s plenty to consider when leaving your business or company assets in a Will. You’ll need to check your shareholders agreements, partnership agreements and articles of association to ensure that you are aware of your rights and obligations. You may need to consider the types of disputes that might arise, and take precautions to prevent these, where possible.

It’s vital that you consider inheritance tax obligations, and that you get the advice of a solicitor, to help you create a will that reflects your wishes.

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