Business owners are risking problems for their business partners and family by failing to make a will, according to leading law firm Mace & Jones.
The warning follows the release of Lawpack research that reveals almost two thirds of Britons have not arranged a will.
Peter Houghton, a wills and probate partner at Mace & Jones, said: “Many businesses are family run with the intention that the business should pass to another family member working in the firm.
“Often a child working with a parent in the family business will have an expectation that the business will come to them. Where this is not covered by a will, families can quickly fall out. The child working in the business may be expected to purchase their siblings shares even if the other siblings have never worked in the business or contributed to its success.”
Houghton added that making a will can prevent significant tax savings being made. “Businesses can qualify for an exemption to inheritance tax, the benefit of which is lost if assets pass to the surviving spouse outright,” he said. “If a business is sold on death and if the proceeds of the sale pass to the surviving spouse, they will be in their estate for inheritance tax purposes.
“Careful planning can ensure that the surviving spouse can still benefit in full from the proceeds of sale but without them being taxable on their death. Tax savings can typically be 40 per cent of the proceeds of sale of the business.”
But Houghton said it is important that the will fits the structure of the business, and takes partnerships and shareholders agreements into consideration.
Houghton warned against people writing their own wills as this can create unexpected costs as the wording can be challenged.