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Draw up your estate plan

Don’t let your business get clobbered!

It’s your responsibility to safeguard your business. Here’s how to do it in three easy steps.

It’s astonishing how many people have achieved great things in their lives yet failed to make an estate plan. For example, recently in the world of entertainment, the late soul legend Aretha Franklin had made no Will, leaving her $80million estate unprotected. The same was true of another musical great, Prince, who died intestate despite his $300million net worth, and his family and lawyers are still wrangling over his assets more than two years after his death.  In the world of art, Pablo Picasso may have lived to a ripe old age of 91 and thus had ample time to put his affairs in order, but he still died intestate, despite his complex family of four adult children by three mothers.  

Closer to home, my good friend Simon (not his real name: confidentiality is king), a talented web-designer with a thriving business, had a massive heart attack out of the blue earlier this year and survived only by the skin of his teeth. While he lay in a coma in hospital for weeks, his partner was distressingly excluded from all discussions about his care, and a business rival tried to steal his clients and ongoing work, and almost succeeded.

So, if something terrible happens to you, and you don't have an estate plan in place, what will happen to your business? In a nutshell: probably the last thing you want! By not making an estate plan, you’re leaving all the crucial decisions about the business in the hands of the government. If you died, the intestacy rules would determine who took over your business responsibilities. If you were incapacitated, those decisions would rest with the Court of Protection, but only after a lengthy, stressful and expensive process.  

Yes, estate planning can be boring, and no one wants to think about death or incapacity, but it doesn’t have to be difficult. Here’s what to do in three easy steps:

Step One: Be Prepared

As a business owner, your estate plan needs to comprise much more than just your Will. You need to make a practical plan for what would happen to your family, property and business if you died or were incapacitated. 

Talk to a financial planner about having the right insurance. Think about critical illness cover, which will pay out a lump sum if you’re incapacitated, and life cover, which will provide your family with security in the event of your death. Relevant Life Cover is an excellent way of making this kind of protection a tax-deductible expense within your business. With the right insurance in place, you can make sure your family’s living expenses are covered if something happens to you. You can also use insurance cover to help your business survive the worst. The proceeds can be used to pay for a professional to stand in for you, or to enable your business partner to buy you out, or to meet your business’s liabilities.

Put some thought into your succession plan.  If you are a sole proprietor, you need to consider who would take over from you. If yours is a family-run business, you need to decide how your share in the business should be divided between your family members. If you run your business with partners, it makes a lot of sense to create a cross-option agreement. This is a contract that says when and how business partners can buy each other out, particularly when a business partner dies or is incapacitated.

Step Two:  Get your documents drawn up.

Make a Will, to nominate someone trustworthy, with appropriate skills and knowledge, to act as your Business Executor. Their job, in the event of your death, will be to make all the right short to medium term decisions about the business in the best interests of your family, staff, suppliers, customers and business partners.

Make a Lasting Power of Attorney for Property & Financial Affairs to appoint the same person to stand in for you and make the right business decisions if you are incapacitated.

Make a Shareholders’ or Partnership Agreement, incorporating the cross-options mentioned above, so that your business partners can buy you out if appropriate.

Make a Lasting Power of Attorney for Health & Welfare, and – belt and braces – a Living Will, so that those closest to you are the ones who decide how you're looked after if you’re incapacitated, and your choices about end of life care are respected. 

Ask your financial advisor to make sure your pension nomination forms are in place, so that your family have access to your pension capital if you die. And while you're at it, arrange for your life policies to be written in trust, so that the proceeds go directly to your intended beneficiaries without unwanted tax complications. These are routine tasks for your financial advisor, which will reap untold benefits.

Step Three: Let people know your wishes.

All the effort of making your estate plan will be for nothing if nobody knows about it. So, make sure all the important people know what’s comprised in your estate plan and where the documents are kept, so they can put your plan into action if it’s needed. Equally important in this digital age, they will need to know your passwords, email accounts and other online aspects of your business or they’ll be working with one hand tied behind their backs.

Making your estate plan isn’t exactly fun, but it is the responsible thing to so. And it’s an essential part of a business owner’s job description. For a helping hand with taking these three important steps, just give us a call on 0151 601 5399 or fill in the enquiry form below.

Unlocking the Power of Trusts

Trusts are useful tools that anybody can use in their estate plan as a shield against the uncertainties of the future.

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Understanding Intestacy

Failing to make a Will can have upsetting consequences.

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"We decided to seek advice about estate planning because we wanted to understand how to efficiently protect our assets and pass them safely to our children and grandchildren. We also wanted to put as much help in place for our family as possible, so as to make things as easy as possible for them when the time comes. We liked Gina’s patient and diligent manner in answering our questions and guiding us to the right solutions. Gina explained everything to us with great clarity, making concepts we were unfamiliar with accessible and clear. We particularly liked the fact that Gina came to see us in our own home without our having to make a special request; this is just the way she works. It was so much easier for us to relax and talk freely in the comfort and privacy of our home. Having put the right estate plan in place we feel that we have ticked a big box. This was something we knew we had to get round to. Now it is done and sorted and we don't have to worry about it anymore. We have also gained a clear understanding of the measures that have been put in place and why they are important. "

Matt & Betty R

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