Will power: part one

Where there’s a Will, there’s a way for a business to make a seamless transition following a death, as Adam Bernstein explains

By Adam Bernstein |

Published:  11 July, 2019

Not all business owners have the foresight of the late Richard Cousins, the chief executive of Compass Group who, along with his family, was sadly killed at the end of December 2017 when a pleasure aircraft he was travelling in while on holiday crashed. Cousins’ generosity led to the charity Oxfam being given £41m in a bequest because of a ‘common tragedy clause’ that he had inserted into his Will.
    
Some 60% of the UK population does not have a Will, including a third of those aged over 55. For a business owner, dying without making a Will and/or planning your succession can have a devastating effect, not only on your family but on your business too as having nothing in place can lead to an interregnum in your affairs.
    
Angharad Lynn, a solicitor in the Private Client team at law firm VWV, says that if you die without a Will your estate will be passed on according to the intestacy rules which changed in October 2014 when the Inheritance and Trustees Powers Act came into force. “Under the new rules,” says Angharad, “if an individual dies leaving a spouse and children, the spouse will take the statutory legacy (currently £250,000) and the rest of the estate will be divided equally between the spouse and the children. If there are no children, the spouse inherits the whole estate.”
    
She warns that for unmarried couples it is particularly important to have a Will as the intestacy rules take no account of such relationships: “If the couple have children, they will inherit everything. If not, the estate will go to other blood relatives. The surviving unmarried partner will receive nothing.”

Choosing an executor
It’s an executor who administers estates after death. There is no limit on the number you can name in your Will. However, the maximum number of people who can take the grant of probate is four.
    
Angharad says it’s quite normal to appoint a spouse or children as executors but suggests that it is also worth appointing a professional who can ensure that business assets are dealt with as you would wish. This can be an individual, such as your solicitor or accountant; alternatively, many professional firms have a trustee company that can act as an executor. She adds that the advantage of this is that while your own lawyer or accountant may have retired (or died) by the time of your death, the trustee company will provide continuity for the appointment of executors, enabling partners from the firm to act. The retirement of your own lawyer will not mean that you need to update your Will.

Assets that can be left by Will
In your planning it’s important to not forget a spouse as assets held jointly can be owned in either of two ways. Angharad says that they can be owned as joint tenants or tenants in common – and this is true for all assets, from your family home to shares in your business: “In essence, if an asset is owned as a joint tenancy, it will pass outside your Will, by the law of survivorship. What this means is that if the shares in your business are held with your spouse as a joint tenancy, they will pass automatically to them on your death and not by your Will, regardless of the provisions of the Will.”

Plan to save on inheritance tax
Tax planning after death must be a consideration and Angharad notes that one of the reliefs from inheritance tax is Business Property Relief (BPR) which is available for a business or an interest in a business, as well as land, buildings, plant and machinery used for the purpose of the business and shares in unquoted trading companies. “BPR is currently awarded at 50% or 100%,” says Angharad, “it’s a very generous relief and it is possible that its use will be curtailed in a future budget. So, when planning your succession, ensure your business will qualify for BPR by checking it meets the scheme requirements.” To qualify businesses must be trading, and if the proportion of assets held in investments is too high the business may not be able to use BPR.
    
The charity Will-Aid runs a scheme each November where simple Wills can be written for a charitable donation. Go to: www.willaid.org.uk

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