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, subject of course to the 30 October 2024 Budget changes due to come into effect on 6 April 2026 (see also below) – and do have an eye out on anything applicable here in the Budget on 26 November.
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 bemade 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 mitigation is (at least before 6 April 2026) the likely availability of 100% relief from tax in the case of a trading (but not an investment) business. This has of course been radically impacted by Rachel Reeves’ Budget Statement on 30 October 2024 and the Finance Bill clauses published subsequently, effectively reducing the relief to 50% for value of more than £1 million owned by any taxpayer or trust. Ministerial statements over the past month or so have made it clear that (despite rigorous representations made by the Country Land & Business Association and other bodies) here will be no watering down of the proposals. And so anyone affected is strongly advised to take professional advice, if not already.
And then in terms of any responsibilities you may have in a club, association or charity, do ensure that in the event of your demise, your colleagues are well aware of what you do and where any papers or information are stored, so as to be able to ensure as seamless a succession as possible.
