Having a plan for your business after your death is important. Perhaps you want your children to be your successor and the company to continue in their name.
Or maybe, if you’re a partner or shareholder, you might want your spouse to take your share of the business.
In her latest article, Wills & Tax Executive Rhiannon Stevinson outlines how a business can be left in your Will.
Can I leave my business in my Will?
Yes, just like most assets, it is possible to leave a business in a Will. But this depends on how the business is set up and what position you hold at the company.
If you own and run your business yourself, making you either a sole trader or sole director, you will be able to pass on your company through a written Will.
However, if you’re one of many partners or shareholders in a partnership or limited company; you won’t be able to pass on the entire company, just your share of it.
Related: How can I pass on my estate and assets when I die?
What happens to a sole trader business when the owner dies?
When a sole trader passes away without a Will in place, their business will be handled in accordance with Intestacy Rules.
Intestacy Rules are a set of legal rules that dictate who inherits what from your estate and how much, without any input from you.
As a sole trader, it is especially important to have a Will in place to ensure that your assets are passed on how you wish; not in accordance with intestacy rules. The intestacy rules may not reflect how you wish to leave your estate so it is essential to have a Will in place.
Further in a Will, the authority for the Executor (person handling the administration of your affairs) comes from the Will itself. A properly drafted Will can give authority for the Executor to start acting in relation to the business as soon as you have passed away and therefore continue the business to help minimise any disruption.
The risks of not having a Will
Without a Will there are no Executors or powers for the Executors to act. This means that the Administrator (person handling the administration of your affairs when there is no Will) does not have authority until they have received the Grant which can often take a lengthy time to obtain.
Furthermore, the powers they hold may not be as you have intended so they are restricted in handling your affairs. This may cause complications if matters of your business need handling during this period.
You can complete our free intestacy flowchart, to see how your estate and assets will be divided without a Will in place, here.
What happens to a limited company when the owner dies?
When a shareholder or partner dies in a limited company or partnership, and they don’t have a Will in place, their share of the business will again be divided in line with intestacy rules.
But what if you want to choose who your share of the business is passed on to?
How do you include a business in a Will?
As a sole trader, including your business in your Will can allow it to continue to operate beyond your death.
This can be done in a few ways, firstly you could nominate an individual or group of people to gift the company to. This is known as a specific bequest.
You can create a trust to hold the business. This way, you would name beneficiaries for the trust to inherit the company within your Will.
Alternatively, the company could be left to form a part of your Residuary Estate.
If you’re an executor who has recently inherited a business, you’ll need employment advice if your taking on employees. You can contact our specialist employment team here.
Related: What would happen to my children if I was to die without a will?
Do you pay inheritance tax if you inherit a business?
Your beneficiary may have to pay inheritance tax when inheriting your business if your estate is taxable.
However, there are a few ways that you can reduce the amount of tax payable and beneficiaries may also be able to claim relief.
What is business property relief?
Business Property Relief is a relief applicable on inheritance tax if the company meets the qualifying criteria which could mean that your estate pays less or even no inheritance tax.
Executors of Agricultural Property can also claim specific relief on inheritance tax. Learn more here.
Tailored Advice
Inheritance tax avoidance and relief, especially involving trusts, can be complex.
To receive advice on this, please call our specialist Wills & Tax Team on 01202 499255 or by filling out the form at the top of this page.
We will be able to assist you in taking steps best suited to your circumstances.
Can I write my own will without a solicitor?
You can create a Will without using a solicitor, however it is not recommended; especially where businesses and high value assets are included.
You want to ensure the best for your company and your beneficiaries. Its best to follow the process of instructing a solicitor who can ensure that your best wishes are represented, and that the Will has been properly drafted in accordance with you instructions.
You wouldn’t want to create a Will yourself and make a mistake that could prevent your assets being passed down to the right person!
Wills & Tax Specialist Solicitors
At Frettens, our bright team of Wills experts are best placed to assist you and would be happy to discuss your circumstances with you over the phone or in person.
If you would to speak to a member of our team, or ask any questions, please don’t hesitate to get in touch on 01202 499255. We offer a free initial chat for all new clients.
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