Here at Higgins Miller we specialise in family law, and that means dealing with things such as divorce, adoption proceedings and interactions with social services. It also means that we help a great many clients to write their wills, making sure that they have the peace of mind of knowing that their nearest and dearest will be looked after upon their death. Many people neglect to write a will, or fail to update their will when circumstances change, and we know from experience just how difficult this can make things for the people they leave behind. We also know how important it is to work carefully on drafting your will if you intend on leaving a business in your will.
Leaving a company in your will is more complex than leaving things such as personal belongings, but it is vital to get it right if you want the peace of mind of knowing that your business will be looked after following your death. It is even more complex if the business in your will is not wholly owned by you but you want to leave your interest or shares in the business in your will. In cases such as this any mistakes in drafting the will could mean your loved ones end up paying excessive amounts of inheritance tax, or that the business in question suffers a loss of value.
If you were to die without leaving a will, then the business or shares in that business would be passed on in line with the laws of intestacy. If you do leave a will but neglect to specifically mention the business or shares then they would be passed on as the residue of the estate, after all other gifts have been made and taxes paid. In some cases, however, a Partnership Agreement or Shareholders Agreement will be in place which would override anything you try to do with the business in your will. An agreement of this kind would dictate exactly what happens to your share in the business, and if you’re intent on mentioning your business in your will then you should work with solicitors to ensure that any Agreement you sign up to in business terms is not going to negate the wishes expressed about the company in your will.
If you work with the experts at Higgins Miller we’ll help to ensure that you leave any company in your will to a person who has the skills to run the business in the way you would like and is actually interested in doing so. As well as helping you to identify the right person and write the will so that they receive the business in your will, we will also help to ensure that the rest of your estate is distributed fairly and in line with your wishes. We will also discuss the inheritance tax implications of leaving a business in your will, and the option of placing the business in a discretionary trust so that the beneficiary or beneficiaries can benefit through the trust without those benefits being taken into account and taxed upon their death.
Under normal circumstances, if you leave a business in your will or a partial share in that business then the other shareholders are obligated to accept the new shareholder whether they inherit under the terms of the will or the rules of intestacy. There is a chance, however, that there are provisions in the Articles of Association or Shareholders Agreement which take precedence over anything stated in a will. There could be an agreement already in place which enables the remaining shareholders to purchase the shares in question upon your death. You need to be aware of any such agreements when writing your will, as your plan to leave shares to a specific family member could be thwarted, leaving them with nothing if you left everything else to other members of your family.
If the shares in question are in a private limited company with model articles of association then the beneficiary to whom you left shares in the business in your will is referred to as a transmittee. As such they would not have the right to attend or vote at a general meeting or agree to any written resolution unless they first notify the company in writing of their wish to do so. Restrictions of this kind need to be considered when you set about leaving a business in your will, in order for your estate to be shared fairly and in the way that you intend.
If you don’t take the right amount of care and time when leaving a business in your will then there’s a chance that the business in question could end up being placed in the hands of someone who doesn’t have the skills needed to make the right business decisions. This would clearly be bad for the business as a whole and for any remaining shareholders, and could lead to conflict, particularly if other members of your family feel that a family business or interest in a family business is being damaged.
Our solicitors helping you to leave a company in your will can also explain the Inheritance Tax (IHT) situation, and the fact that some types of business qualify for relief from IHT at either 100% or 50%. This is often applied in situations in which paying IHT would force the sale of something which is a family business. You will need to have owned the business for at least two years before dying to qualify for Business Property Relief, and we will explain any other conditions when helping you to write your will. If relief of this kind does not apply then the full value of the business in your will is included in your estate and taxed accordingly. Understanding how relief of this kind operates and what you can do to minimise the IHT burden faced by your loved ones is just one of the many good reasons to seek out our help when planning on leaving a business in your will.
If you’d like to find out more about leaving a company in your will please call us on 0161 429 7251 or email us at [email protected]. We’ve recently passed our Cyber Essential accreditation, something which demonstrates our forward-thinking attitude and determination to remain ahead of the competition. The first 20-minute appraisal is provided free of charge, and we’ll give you the first appointment for a fixed fee, so you don’t have to worry about how much our advice is going to cost. If you want to explore our wider charging system then please take a look here.
