Wills and Cross Option Arrangements

I often work in conjunction with my colleagues in our Company Commercial team, particularly for business owners who are thinking about their own Wills and Inheritance Tax planning.The most frequent area in which my colleagues and I work together relates to the preparation of cross option agreements.

In my previous blog I discussed the importance of preparing a Will, bearing in mind an individual’s business interests, and how consideration should given to crystallising Business Property Relief, assuming it is available.

For many clients who are in business with others, thought will need to be given as to how that business will continue after the death of a shareholder or business partner.It is at this time that a cross option agreement should be considered and, in appropriate, I would introduce my colleagues to the matter.Whilst they will deal with the drafting of the appropriate documentation I will continue to discuss with the clients what will happen and how the Will should be construed in conjunction with that cross option agreement.

It may also be appropriate to arrange for suitable life insurance to be put in place, following the advice of an appropriately qualified Independent Financial Advisor, in order that if one party dies the survivor will have the funds available to buy the deceased’s interests in the company.

The structure of the business, and all relevant circumstances, will dictate how a cross option agreement should be prepared, but the basic principle is to allow a surviving business owner to buy out the interest of the deceased owner, or for a surviving spouse/partner to sell the inherited interest, if that is the intention.

There are various permutations, as mentioned above, and if it will be helpful to discuss these issues please contact Richard Horwood.

Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.