Wills and Lasting Powers of Attorney for Business Owners
Charles Fraser, Head of the Older and Vulnerable Clients team at Longmores, has 25 years’ experience of advising families and their businesses. Here he answers some typical questions about Wills and Lasting Powers of Attorney for business owners.
Do I need a Will?
A question often asked by clients is whether they need a Will if they intend to leave everything to their surviving spouse. The simple answer to this is “yes”. Assets that qualify for Business Property Relief should be left as specific legacies in your Will in order to maximise the tax advantages.
Should I leave business assets in a trust or give them to my spouse or children?
Much will depend on the circumstances of your particular family and what you would like to achieve. Gifting assets that qualify for Business Property Relief (BPR) to a discretionary trust enables assets to pass into the trust without paying Inheritance Tax. These assets can then be bought from the residue so that the business assets are then in the survivor’s estate. On the survivor’s death BPR would be available on the business assets again. The assets in the discretionary trust, however, will be subject to a much lower rate of Inheritance Tax. This is often known as “double-dipping”.
What is a Business Lasting Power of Attorney?
Many clients will have considered having a Lasting Power of Attorney for Property and Financial Affairs (LPA) in relation to their personal assets. You may, however, want to deal with your business assets differently. There may be regulatory reasons which prevent your spouse being your attorney for your business, but you would not want your business partner to deal with your personal matters. In order to achieve this, a separate LPA is necessary appointing different Attorneys. This type of LPA has grown in popularity over recent years and ensures that your business needs are met. If you are the sole decision maker in relation to your business, having a back-up may be a necessity, especially if you employ staff.
Who can run the payroll if I am not around?
Much will depend on how your business is set up, what authority is given to your bookkeeper or accountant, and what arrangements you have in place now. If you are temporarily incapacitated your Attorney will be able to make decisions on your behalf and authorise payments if you are a sole trader.
Do I need a Shareholder Agreement?
If you own shares with others you may wish to consider having a Shareholder Agreement which limits who the shares can be sold to, and who may they entitled to inherit shares. The agreement may also specify whether shares must be offered to other shareholders or family members before being sold to somebody else. Lastly, Shareholder Agreements may limit who may be the beneficiary of your shares under your Will and therefore it is important that you look at your Will and Shareholder Agreement at the same time.