You can't take it with you

Monday, 28 February 2011 00:00

In one programme the excellent Gerry Robinson brought his usual common sense approach to the difficulties faced by the owners of a family business. Some of their children wanted to continue the business after their parents' death and some did not. Most of the family wealth was tied up in the business and the problem the parents faced was how to benefit all their children without the business having to be sold.

This is by no means an uncommon situation. There are various solutions, depending on the individual circumstances. Here are a few suggestions.

A partnership could be established with all the children entitled to share profits. Those actively involved in running the business could be given a larger share of the profits. The partnership agreement would provide how the proceeds of any sale would be divided, perhaps with a larger share of capital profits going to those who had managed and built up the business.

Cash legacies could be left by the will to those not wishing to participate in the business. Those who wished to continue it would have to raise finance to pay the legacies but would then own the business in their own right, albeit with the encumbrance of a bank loan.

The business could be given by the Will to trustees with directions to pay a certain sum to the non-involved beneficiaries over a period of time, before transferring the business to those running it. In the meantime the trustees would pay a salary to those beneficiaries managing the business.

The situation becomes still more complicated if Inheritance Tax is payable. Trading businesses may be exempt from the tax but investment businesses are not. If Inheritance Tax may be payable this must also be considered in drafting the Will.

For owners of family businesses it is especially important to consider Wills and Inheritance Tax in good time. They are not easy subjects and the daily pressures of running a business can easily push them into the background. The fact is that, like most problems, the later they are left the more difficult they become.

If you are considering making a Will but find the issues difficult to decide, remember that it is not necessary to come to us with a fixed idea of how the Will should be written. Sometimes it is better to come with a general idea of what you want to achieve and let us suggest ways of achieving it. It is helpful if you prepare a rough list of your assets and bring it to the meeting with a copy of your latest annual accounts. We can then discuss your individual situation and guide you through the possibilities and legal technicalities to a solution that is right for you and your family.

If you watched any of the programmes in the BBC 2 Series Can't Take It With You and you have questions regarding the drafting of your Will, please contact Ted Foulkes, Head of Wills at Tozers LLP, on 01392 207020.