Wealth Management: Wills and succession planning for business owners
In the final instalment of our Wealth Management series, Moore and Smalley’s Lee Salter discusses the importance of succession planning for business owners.
Making a will – and keeping it up-to-date – is absolutely critical to business succession planning. It is one of the most straightforward and inexpensive procedures – yet all too many owner managers put making a will on the back burner and never get round to doing it.
Removing uncertainty surrounding family business’ future
Wills are especially crucial for family-run firms with informal management structures where various family members make their own assumptions about how the business will be run in the future.
In the absence of a will, disputes can spiral out of control, and succession planning is the first casualty, sometimes with calamitous consequences – such as a drastic drop in the value of the business.
Business owners who make a will – and regularly review it – have the assurance of knowing their estate and its business assets will pass to the people of their choosing.
Maximising the benefits of a properly drafted will
Working closely with your legal team, an experienced financial planning consultant will also advise on business property relief and inheritance tax. Having a will based on sound financial and legal advice is pivotal to ensuring your business passes to your beneficiaries in a tax efficient manner.
Sometimes the oldest sibling, or the one who has worked at the firm longest, presumes he or she will inherit the top job, when in fact, another, more capable individual is better equipped for the role. By making and updating a will, family business owners can remove conflict and uncertainty among siblings as to who will be left in charge.
The damaging consequences of failing to make a will
If a business owner dies without having made a will, the state will assume responsibility for distributing the estate – including all business assets – under the Rules of Intestacy.
This frequently results in assets being passed to individuals in a way the deceased had not intended, which can destabilise the business and erode its value.
So the message is: check that you have an up-to-date will, and if you haven’t, speak to your professional financial and legal advisors to get one drafted at the earliest opportunity.
Lee Salter is a financial planning consultant at Moore and Smalley