Business owners who overlook personal affairs in succession planning risk leaving their families with much more than grief after death.

Wealth but no written will. This is still the situation for so many clients who die unexpectedly. It's extraordinary.

I have a case in point concerning the majority shareholder of a successful family business (a 'key man'). His estate is subject to intestacy rules, so certain family members get a prescribed share, and the court must appoint personal representatives (PRs) to administer it. This takes time. And the business has to continue. So who will manage it?

The other shareholders are family members with notional holdings to 'involve' them in the business. But they haven't been involved on a daily basis and have no idea how to run a company. Also, they are grieving, and turning their minds to such matters seems trivial. The authority of the PRs to run the business does not start until letters of administration are granted. This could be months.

The upshot is stagnation, which invariably results in commercial losses. This is the sort of knotty problem that wealthy people, whose lives are usually so attuned to sensible financial planning, should be avoiding with relative ease.

Many of my clients are successful, and those who have grown their small business through hard work and the Midas touch are a pleasure to work with. However, acting for these wealthy individuals can bring challenges. While they may have a host of corporate and financial advisers serving the business, their personal affairs tend to take a back seat, ironically.

The most regular oversight is the will: non-existent, inadequate or out of date. Powers of attorney are often forgotten too. This neglect can lead to costly and anxiety-ridden court action and rifts between family members as well as having a detrimental effect on the business itself.

A simple will is only useful for a person with straightforward assets. It will not address the matters that arise for someone with business interests, i.e. a majority shareholding in a small company, a significant stake in a partnership or solely run unincorporated business. Who will run the operation in the event of death or incapacity? Who will inherit the majority shareholding or partnership interest, and will they get on with the continuing shareholders/partners/family? There are so many issues to address.

I advise business owners to not only have a properly drafted will for themselves with an appropriate power of attorney but a 'company will'. The latter could be as simple as a letter to executors setting out a post-death business plan, detailing who the day-to-day running of the company should be delegated to and shared with those involved so that they are onboard.

Rearranging shareholdings post-death is another matter. A shareholder will invariably want to leave their shares to their spouse and children, but the family usually needs cash not shares after the main breadwinner has died. The remaining shareholders may have problems raising cash to buy the shares, so an option agreement pre-death, giving shareholders rights to purchase a deceased shareholder's shares is advised. Also I suggest considering policies to insure shareholders' lives and provide funds with which to purchase the shares. Putting these measures in place now will pay dividends later.

Finally, there is inheritance tax (IHT). Many clients are aware that business property relief can grant 100 per cent relief from IHT on a gift of business assets, but it should not be taken as a given. There may be terms in their shareholders' or partnership agreement that prevent the relief applying, for example, and they often need to think about preserving the relief for the next generation, such as in a family business. It's rarely straightforward.

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