If you worked hard to establish your business, its continued success might be almost as important as looking after your family after you have gone. Thinking about business succession means that you can put measures in place to ensure both your business and your family continue to thrive. But there are many factors you will need to consider.
The risks of business inheritance
Unlike most assets you will leave, businesses come with obligations. Whoever inherits will inherit an asset, but one that might need significant work if it is to keep its value. And, sometimes, they aren’t the right person for a job. Sadly, you can leave someone a business, but you can’t leave the skills they need to run that business.
Even if they had the necessary skills, the beneficiary might not even want to run a business and might prefer to follow a different life path. Or it might be that a surviving business partner would buy out the business from the estate, but don’t have the resources to do this.
The danger is that the business you worked hard to build loses value, potentially leaving your loved ones with a failing business that isn’t going to cover a big inheritance tax bill.
What to consider when dealing with your business
Perhaps the most important thing is to decide how and to whom to leave your business. While many items in your will might be straightforward, not everyone will want a business. It’s worth discussing the future of a business with everyone involved, that would include your family, who might expect to inherit, and business partners who will be affected by your decision.
Business owners that think ahead will often take out insurance and cross-option agreements. These can help by providing an insurance payment for a surviving partner which they can use to buy out a deceased partner’s share, while the cross-option agreement will give them the right to buy that share. It means that the surviving partner can have confidence they will remain in control of their business.
However, they will still face the same risks any will faces from an unknown future. Things like remarriages or changes in circumstances, before and after a death, can cause such agreements to unravel and result in challenges.
Creating a will for your company
A popular option we offer at The Right Will is to create trusts for businesses. This helps maintain ownership of the business, and its benefits, within a family, while offering security and control to surviving business partners.
In it, the deceased’s share enters a trust, which owns the business. The terms of these trusts vary but will usually include the other business partners as trustees. It can even offer discretion, so the beneficiary family members can simply benefit from the asset they were left, or even take on a role in the running of a company if they want.
Plus, it creates further benefits. For example, profit payments to the trust can be distributed in tax-efficient ways, and because it’s owned by a trust, the asset will not be liable to subsequent inheritance tax or care cost claims.
With expert advice, it’s a robust way of making sure that your business thrives after you have gone, and that your family, and business partners, get all the benefits you want from your estate.
Contact the Right Will today to secure your business assets for your family.
