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29th Mar 2024
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Business owners risk chaos by not writing a will

by The Editor at 09:25 31/10/06 (News)
Business owners could risk big - and potentially costly - problems for their business partners and families if they do not make a will.
Law firm Mace & Jones warned that serious complications can arise in the ownership of the business if a will is not made or poorly written, after research from Lawpack revealed that almost two thirds of Britons have not made arrangements for their 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.”

Tax savings
Many business owners who do not make a will also lose out on significant tax savings.

Mr Houghton said: “Businesses can qualify for an exemption to inheritance tax, the benefit of which is lost if assets pass to the surviving spouse outright.

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.”

It is also important to ensure the Will fits the structure of the business and is properly drafted. He said: “In circumstances where the business may be subject to a partnership or shareholders agreement care must be taken to ensure any will is compatible with the terms of the agreements and that the agreements themselves do not prevent the tax reliefs being claimed.

“The benefit of making a will with a trust and tax specialist is that they have the experience to look at the whole picture. They understand the interaction of the business with the will to ensure that any planning undertaken will be fully effective.”

Survey
A survey earlier this year by Scottish Widows revealed that one in 10 adults in the UK have fallen out with a family member over an inheritance. The survey of 2,294 people by You Gov found money is the prime cause of rows. The majority of the arguments were said to be between brothers and sisters, with 42 per cent never speaking to each other again after the argument.

You Gov found that some 10 per cent of those who had a will said they wanted to ensure their estate did not go to someone they did not like.

But the research discovered that 60 per cent had not drawn up a will, with people most likely to take the step following an illness, a serious accident or a child's birth.

According to the research, some 20 per cent of arguments over wills stemmed from claims that an estate was divided unfairly.

About five per cent of rows occurred when someone found out they were not to receive an item apparently verbally promised to them.
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Susie Hughes © Hardhatter.com 2006
The Editor

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