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Why business owners and directors should consider their legacy when making a Will

Martin Baker is a member of BusinessWise, Swindon’s leading not-for-profit business referral group. He has the seat for Wills & Lasting Powers of Attorney through his company Martin Baker Estate Planning. Here he shares some tips for business owners or directors when it comes to their legacy.

If you own all or part of a business this is likely to be your most valuable asset – apart from perhaps a family home.

There are a number of people who may rely on you, for example, family, staff or other stakeholders.

Whilst you may believe that nothing will happen to you, how can you protect these people if you pass away or unexpectedly lose mental capacity? I believe it’s so important to have an up-to-date will and a lasting power of attorney (LPA) in place for your business.

Benefits of a Will in relation to a business:

  • Appointment of Executors – this enables you to appoint someone with the right skills and experience to run the business in your absence, or to sell the business and maximise the value to the beneficiaries.
  • Beneficiaries – unless otherwise dictated by a separate shareholder/legal agreement you can choose who you want to benefit from your business. Without a Will the rules of intestacy apply and may lead to some surprising results. For example, if you are married your spouse may not inherit all of your estate.
  • Inheritance Tax savings – if you own a controlling interest in a business, it is likely that you will be eligible for Business Property Relief. This means that up to 100% of the value of the business is free from any inheritance tax obligations (it should be noted that BPR is a large and complex area of tax and this is only a brief overview of the area). There are some interesting areas of estate planning that open up with the use of BPR. Double dipping is a strategy which ensures that assets which qualify for reliefs (such as BPR) are not left to a spouse, as the relief would be wasted due to spousal exemption, but are left to the children, for example. The surviving spouse can then use other assets to purchase these BPR assets, which can qualify for relief again on second death.

Most people understand the rationale for setting up a Lasting Power of Attorney (LPA), which allows an individual (a donor) to nominate someone (an attorney) to take decisions on their behalf if they are temporarily or permanently incapacitated.

However, only a few people know about the option to put in place an LPA for their business when, for example, the sudden illness of a business owner could result in serious problems for the business and its staff.

Benefits of an LPA for Business Owners

  • You can choose a trusted individual to run your business in your absence. Every person that your business deals with will have the confidence that the business will continue to operate if you aren’t around.
  • Your family, and those closest to you, can have the confidence that there are measures in place to ensure the business still operates (and makes money) should something happen to you.

If you would like to know more about Martin visit https://www.businesswise.org.uk/members/martin-baker-estate-planning.html

Image by BusinessWise member Neil Moore of Moore Photographics

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