If something unexpected befell one of the key people involved in running your business, what would happen?
It is important that every business has a crisis plan in place to make sure that the business can operate without key individuals if needs be. This should amount to a review of not only their constitutional structure, but also of the personal affairs of the individuals involved.
In family businesses in particular, it is not uncommon for the founding members to remain involved in the running of the business into their later years. Something that is rarely considered is the potential for a lack of capacity or even unexpected death of key individuals.
In each case most people assume that their partners could manage without them or that their family could take their place. However, this may not necessarily be the case: business accounts may be frozen, leaving your partners unable to operate the simple every-day tasks of paying bills and salaries. It may be months before the account can be accessed, by which time it is possible that the business will have suffered irreparable damage.
Therefore, it is vital that all business people put in place lasting powers of attorney for their business interests and select sensible and competent attorneys to take the reins. In fact, in some
industries a business partner who fails to put such provision in place may be non-compliant with their professional regulations.
It is also important to make sure that the provisions of your will are sensible and suitable to the needs of both the business and your family.
The correct combination of cross-option agreements and insurance policies can offer business partners the comfort of retaining control of the business following the death of a partner, whilst also ensuring that the cash benefit of that interest ends up in the hands of the bereaved family.
These documents need to be drafted carefully to ensure that any available inheritance tax relief is not inadvertently lost in the process.
Rachel Sugden is an associate, solicitor in the wills, trusts & probate team at Willans LLP. She is a full member of the Society for Trust and Estate Practitioners (STEP) and enjoys helping clients with complex estate and tax planning, lifetime trusts and the administration of estates.