Estate Planning: Protect and Plan for the Future

Womble Bond Dickinson

Entrepreneurs and business owners are naturally – and rightly - focused on running and growing their businesses, particularly with Brexit looming, along with other seismic changes in the global economy. But this can mean many neglect to put effective estate planning measures in place.

Reviewing the structure of the business

Look out for the tax breaks. In the UK, many businesses qualify for 100 per cent business property relief (BPR) from Inheritance Tax (IHT), meaning that the shares of a deceased shareholder can often pass to their chosen beneficiaries free of IHT. Many business owners take this relief for granted. However, if a business includes non-business assets or non-trading activities, this relief may not be available. We can assist with a review of the relevant business to maximize the availability of BPR.

Will planning

Under the intestacy rules, which apply if a person dies without making a will, only limited provision is made for a surviving spouse if there are also surviving children. Some business owners may also want to ensure that their spouse is provided for, but in a way which preserves their assets for the ultimate benefit of their children, which the intestacy provisions or a simple will cannot provide for. A will drafted by a specialist lawyer can not only minimize the potential liability to IHT, but also provide flexibility to deal with whatever circumstances the family may face following a sudden death.

Lasting (or Durable) Powers of Attorney

If a shareholder becomes unable to make business decisions or deal with their shares, but has completed the right kind of power of attorney, appointing someone to take on that role, this will ensure there is minimal delay in making key decisions.

In the UK, the alternative is an application to the Court of Protection to appoint a deputy to make such decisions, but this can take months and the deputy has to act under the direction of the court. We can deal with all aspects of powers of attorney, from preparation to registration, as well as acting as an attorney if required.

Planning for an exit

Too frequently, entrepreneurs exit a business without thorough consideration to the form that exit should take and may suddenly find themselves with cash on which tax would be charged in full on their death. If the right planning is undertaken to reorganize their business interests pre-exit, it ensures that some or all of the proceeds, are protected for their family.

Creating the right team

In all of the above areas, having the right advisers to provide specialist support is vital. This is likely to include a tax adviser, lawyer and financial adviser. If a business exit is anticipated, additional support may be required from corporate specialists and the business is likely to need its own advice. Investment advice will also be crucial if an exit is going to generate significant cash proceeds. We put clients in touch with the right people to make sure that they get the advice they need at every stage and with a team of corporate lawyers in-house, we can assist with any business reorganization or review of governing documents.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Womble Bond Dickinson

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