You may have retired or been an employee during your working life rather than a business
owner. However, if you own a business or a share in one, there are important things you need
to consider carefully. This brief treatment hardly does the subject justice and so further
discussion with a solicitor will be needed, and those who inherit your business interests may
well be very grateful to you.
You will need advice on (a) what happens to your business interest on your death and (b)
ensuring you don’t miss out on the Inheritance Tax reliefs.
Separately, or in addition, you may well be involved in the management or running of the
company or business. In such case, you will need to ensure that proper procedures are in
place, so that colleagues are aware of what you have been doing and arrangements can be
made for those functions to continue. Similarly, of course, if you are responsible for some
management role within an association or club or a charity perhaps.
So, my Question: if you are involved in the management of a company or business (and/or
own an interest therein) or in a club or association or charity, have you taken steps to provide
what would happen in the event of your death?
If you are either a shareholder in an unlisted company or a partner in a business, it is likely
that a Shareholders’ Agreement or the Partnership Agreement will specify what happens to the
interest in the company or business on death. Typically, there will be ‘pre-emption rights’,
under which the other shareholders or partners have a right within a specified period of time
to buy out the deceased shareholder’s/partner’s interest at market value. Such a provision
would usually take precedence over any gift under the Will.
In the case of a business which you own and run in entirety, there may be someone engaged
in the business who you would like to take over after your death, maybe a son or daughter or
an employee, typically by way of gift (rather than a sale/purchase). This needs careful
planning, if not done already.
Also, consider what impact your death would have on the business and what would happen in
the immediate aftermath. If, for the business to be able to continue, the contribution you have
been making needs to be continued in someone else’s hands, it may be appropriate to
consider ‘keyman’ insurance. Such insurance covers that eventuality, to enable the business to
hire the appropriate person at the appropriate salary over an appropriate period of time.
Similarly with a sole trade, which can be a bit more complex.
All these issues are matters you need to discuss with your business colleagues (if you have
them), so that together you can make appropriate provision for anyone’s unexpected death.
The other point to bear in mind in terms of Inheritance Tax is the likely availability of up to
100% relief from tax in the case of a trading (but not an investment) business.