This is Free Wills Month, where those over 55 who want to leave a legacy to charity can have simple wills written for free in return for their planned donation.
For entrepreneurs and business owners, though, the issues surrounding passing on assets can be more complex, so it can be better to get professional advice on legacies and how to write a will that will best serve the needs of your family.
Mike Barton, a former banker and now writer and now personal finance expert at Wallet Savvy, says business owners often forget to plan or find the process too complex.
Nonetheless, he says, it is vital work.
“I remember an incident during my tenure at Merrill Lynch. A small business owner approached me, absolutely befuddled by the maze of wills, assets, and inheritance. It wasn’t just about the paperwork for him; it was about ensuring his life’s hard work would continue to nurture his family even in his absence,” he says.
When making a will if you own a business, it is usually sensible to speak to a financial adviser with an expertise in tax.
Businesses are treated differently from other assets when you’re passing them down the generation, but you will need to understand the rules to take advantage of this.
If you own shares in a business that carries out certain trades, they will be exempt from inheritance tax. There is more detail on exemptions on the government website, here.
If you sell the business on exit though, your family could end up with a big inheritance tax bill as the proceeds from the sale become part of the estate, attracting inheritance tax.
Nick Evans, senior advisor at Financial Planning Corporation (FPC), says there are ways to combat this, including gifting shares into trusts and converting company loans into shares. It’s also important to realise that if a business is owned by a company but not being used for company business its value is not exempt, and if there is excess free cash in the business this is also an issue, he says.
While you can protect your family income by buying life insurance, there are insurances that you can take out to protect your business should the worst happen as well.
Ian Wright, director at business finance site Business Financing, says that there are several types that business owners should think about.
“Business Protection insurance can be taken out to cover the cost of any outstanding business loans<’ he says.
“Ownership Protection insurance will make sure that other partners or shareholders can purchase your share of the business. Without this in place, your business assets would usually go to your family, which can be complicated and difficult for both the business and the family members who inherit.”
A plan of action
One of the most important things you can do to ensure your business continues if you are no longer around is to make a ‘continuity plan’.
In business with multiple owners and partners, this should contain agreements about what would happen if one of you was no longer around. In small businesses it may just contain contact details and information about the business’s finances and assets – plus insurance policies.
Once you’ve made this document, Evans says, it is vital to keep it up to date. The same is true of your will, which you should continue to check every few years to ensure that your business details and wishes are still current.
If your family circumstances change, or if you sell or start a business, you should also update your will.
Rosie Murray-West is a freelance journalist covering all aspects of personal finance, as well as business, property and economics. A former correspondent, columnist and deputy editor at The Telegraph, she now writes regularly for publications including the Times, Sunday Times, Observer, Metro, Mail on Sunday, and Moneywise magazine.