First, we need to address intestate. As we have written about before, dying intestate means to die without a will. If you die without a Will, your estate falls into a “fail safe”, which will have your assets distributed among your closest family, starting with their spouses and children.
While this sounds very much like what many of us would want to do anyway, these rules are firm, and they do not consider unmarried couples spouses. Leaving girlfriends, boyfriends, partners and step-children at a loss, and unable to receive your assets.
After this, the beneficiaries may then be obliged by Her Majesties Revenue & Customs to sell a majority of the estate to satisfy tax implications.
To resolve this, you must have your own Will and estate planned. We consider these different things, as a Will can only do so much - you need to have your entire estate planned, this is a far more complex thing than “just” a Will, but can result in a far more secure future for yourself and loved ones. Contact us today for advice.
Intestacy is one of a slew of issues that can occur without proper business & estate planning, below are opportunities to avoid these issues.
How To Prevent Issues
The best-practice for ensuring your estate planning and shareholders agreement go hand-in-hand is to literally have the documents reflect each other.
This can begin with revising your partnership / shareholders agreement. Partnership agreements and shareholder agreements will address everything from total number of shares, to force majeure. You will find in reviewing your documents that your partnership agreements will likely also include a provision that addresses what will happen in the event of someones death.
It is likely that the clause will state the remaining partner will purchase the shares off of the estate of the other partner, but this not always the case.
While this is somewhat of a status quo, this may not be your ideal solution. Perhaps you want the shares to pass onto someone else to pick up the reigns, forming a new partnership, or want to gift the shares to your existing partner instead. We recommend seeking professional advice on how to best construct these agreements.
So, If possible, practice to review the agreement you have with your business partner, and ensure the terms are acceptable to you both in the eventuality of someones death before having the document revised by a professional if necessary.
Simultaneously, you may want to consider addressing your trust planning together. It is of course possible that you would like for a percentage of your ownership to pass to your family, which, while very possible is not always the best idea. You may find that this swallows up your Business Property Relief allowance and leads to a greater inheritance tax liability, as you see your Inheritance Tax allowance used.
A solution to this would be to create a family trust, and transfer the shares there. This transfers the assets and wealth into a secure trust, and avoids the tax liability falling at the doors of your family.
If you wanted to explore this further, please contact us for professional guidance here.
Some additional things to consider…
A Lasting Power Of Attorney. The lasting power of attorney is a failsafe plan which allows you to provide a trusted person with the right to make decisions on your behalf in the event you no longer have the mental capacity to make them for yourself. The important phrase in this is “mental capacity” as the Lasting Power of Attorney only comes into play in the event that you have lost the ability to make decisions for yourself that are in your best interests.
Of course, if you are a shareholder of a company, it is imperative that your obligations can be fulfilled even if you are unable to do them yourselves, so we would recommend exploring creating A Lasting Power Of Attorney for your future.
As a quick and final point to make, if you had a Will prior to being married, and have since got married, that Will is automatically voided. Your and your business partner should revisit your wills if you have both got married since going into business together.
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