Written by Vicki Rolland, head of legal at MWQ Estate Planning
Most business owners continually dedicate time to forward planning. Whether that’s considering upcoming recruitment, factoring in rising costs, or developing an ongoing growth strategy for your business, we can all appreciate the necessity of preparing for the future.
For many, however, setting plans in place to protect their business, employees, colleagues, shareholders, family, and estate in the event of their own death or incapacity isn’t high on the agenda.
We often hear from our clients that they wish their loved ones or business partners had understood the importance of a written business will or granting a business legal power of attorney (LPA). The hard truth is that by the time you need it, it’s too late to arrange.
Without plans in place, your business affairs can quickly become a tangled web, with tasks that you sign off – from decision making to organising payments – stalling immediately, sometimes with devastating consequences.
An LPA grants legal permission to a partner or loved one to act in your interests when you cannot; for example, during short- or long-term illness and incapacity. Perhaps you have one in place already. Did you know, however, that it’s possible to create separate business and personal power of attorney arrangements, allowing you to choose different people to make decisions about your business and personal affairs? Consider this: is there one person in your life who you would trust to choose a care home for you to live in, and also negotiate the sale of your business? If not, you should probably have two LPA arrangements.
If you don’t have an LPA at all, take a moment to consider the implications of a person you don’t know or trust making either of those decisions on your behalf.
It’s important to note that a business power of attorney would be overruled by any conflicting agreements built into partnership or shareholder contracts. The fact is, however, that most partnership or shareholder contracts don’t include agreements relating to death or incapacity.
Next, you should decide whether it’s appropriate for your business and personal affairs to be joined by the same will. Often, even in small or family businesses, it isn’t. Every scenario is different, but in most cases, businesses run more smoothly and with fewer complications when lines between business and personal are clear, and plans for business interests are distinct. In that instance, the best course of action is to write a business will, utilising a specific tool created to ensure that your wishes for your business are carried out after your death.
I would always recommend seeking independent financial advice before creating a business will or LPA. An independent financial advisor (IFA) will consider your estate as a whole. With the help of an IFA, you can manage your inheritance tax liabilities, ensuring that you take the right steps and do what’s necessary and fair for both your family and HMRC. Establishing a business property relief trust, for example, could eliminate up to 100 per cent of inheritance tax liabilities where businesses plan to remain operational. In this case, a board of trustees would safeguard your business, allowing it to be run and managed collectively in the best interests of your estate and the loved ones who stand to benefit from it.
Estate planning should never be rushed. There is a myriad of variables at play, and many decisions to be made about your hopes and aspirations for your business, your own future, what you’d like to leave behind, and to whom. The alternative, however, is to leave those decisions to the courts, to the archaic law of intestacy, and to chance. It’s sad but true that this, so often, leads to delay, disruption, and upset for the loved ones who will be forced to make decisions under stress while underprepared.
As employers, it’s also crucial to consider the welfare of your people. Offering estate planning services as an employee benefit can empower your team to effectively plan for their own financial legacies. Often overlooked by employers, this high value workplace perk demonstrates care for your staff’s wellbeing while contributing to their overall financial security and delivering peace of mind.
If you’d like to find out more about business wills, LPAs, or business trusts, or to discuss estate planning with our expert team, contact Vicki Rolland on vicki.rolland@mwqestateplanning.co.uk or 0800 090 3051. We’re offering a 20 per cent discount to Champion clients on wills, business trusts, and LPAs, meaning that you could arrange all three from £349.
Visit https://mwqestateplanning.co.uk to find out more.
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