THE BUSINESS OWNERS GUIDE TO WILLS AND LASTING POWERS OF ATTORNEY (LPAs)

THE BUSINESS OWNERS GUIDE TO WILLS AND LASTING POWERS OF ATTORNEY (LPAs) How successful business owners and partners can PROTECT THEIR BUSINESSES AND FAMILIES. WILL & PROBATE Welcome Nobody wants to think about Wills and Lasting Powers of Attorney. However, it is vital that you leave a valid Will so that when you do pass away your wishes are respected. It is important that you have Lasting Powers of Attorneys (LPAs) in place so someone else can manage your finances and welfare when you are unable to do so. It is even more important that business partners, owners and directors not only have these documents but that they also dovetail with their company documentation. If they don t, then their business may fail or lose considerable value and their family could face financial hardship. This guide gives you a brief overview so you can ensure that you, your business and your family are protected. We hope you find it useful. If you would like more information or would like to arrange an informal discussion please get in touch. Kathryn Caple HEAD OF WILLS & PROBATE LEGAL SOLUTIONS FOR YOU AND YOUR BUSINESS 01283 526 230

2 Contents WHY DO YOU NEED A WILL? PAGE 3 THE IMPORTANCE OF BUSINESS WILLS AND SUCCESSION PLANNING PAGE 4 WHY YOUR WILL MUST DOVETAIL WITH YOUR BUSINESS AGREEMENTS PAGE 5 INHERITANCE TAX AND BUSINESS OWNERS PAGE 6 WHAT IS A LASTING POWER OF ATTORNEY? PAGE 7 MEET THE TEAM PAGE 8 Why Else? Else is a modern, dynamic and forward thinking firm of solicitors who have the expertise you expect from an established and successful law firm. We are different to other legal firms. We will help you put Wills and LPAs in place so that your business is protected, and then look at other ways that we can add value to your company. You will discover that we have an enviable reputation for always going the extra mile and offering a personal, jargon free service. You can rest easy that you are in trusted hands. You will feel secure in the knowledge that our understanding and experience will protect your wealth. If you would like to know more about jointly protecting your personal and business interests please contact our Head of Wills and Probate, Kathryn Caple, on 01283 526230 or at kathryn.caple@. Kathryn is an experienced solicitor who is very sensitive to the emotional as well as business needs of our clients. To speak with Kathryn Caple or Yolanda Ride to discuss your needs, please call or email and we ll guide you through the process. CALL: 01283 526 230 EMAIL: kathryn.caple@ yolanda.ride@

3 1. Why Do You Need a Will? Every adult with assets should have a Will. In brief, with a valid Will YOU: Control How Your Estate is Distributed A Will leaves clear instructions about how your estate is distributed including specific bequests ranging from cars and property to jewellery and furniture. Without a Will, everything you own will be shared out in a standard way defined by the rules of intestacy (the condition of dying without a Will). People who are not related to you (including unmarried partners) cannot inherit under these laws. Equally, family members you do not want to inherit may end up with some of your estate. If you have no surviving relatives then the Government benefits. The Treasury inherits millions a year from people dying without a Will. Prevent Problems and Disputes A Will makes it much easier for your family or friends to sort everything out when you die without a will, the process is time consuming and stressful. One of your family must apply to the Court to become an administrator. This person is then responsible for the daunting task of collecting all your assets, paying all the liabilities including tax and correctly distributing your estate. This can become very onerous as they may need to locate missing relatives. A Will also reduces the possibility of family disputes over your estate. Control Who Inherits Your Business You may have one child who works in your business and expects to inherit it. Without a Will, the child working in your business may have to buy your other children out (who automatically inherit under the rules of intestacy) or make a claim against the estate. Not only could this lead to a family dispute, it would also have a negative impact on your business. Minimise Inheritance Tax A properly structured Will can help reduce the amount of Inheritance Tax that might be payable on the value of the property and money you leave behind. It also allows you to pass on your business assets to your family in accordance with your wishes and ensures that the maximum Inheritance Tax savings are made at every stage. TESTIMONIAL Power of Attorney was dealt with in an impressive, professional, efficient and approachable way. Exceptional customer service received. Catherine Allsop

4 2. The Importance of Business Wills and Succession Planning A Will for a Business Owner needs to cover more than just deciding who should inherit the value of your estate. It should explore how best to ensure that the real value of the business can be retained and transferred to the intended beneficiaries. THE WAY THIS IS DONE DEPENDS ON IF YOU ARE PLANNING TO: 1. Pass your business onto the next generation 2. Sell your business and distribute the proceeds In either case, you need to consider how goodwill can be maintained and who will run your business after you have gone so that its full value can be realised. Pass Your Business onto the Next Generation If you intend to pass your business onto the next generation, THEN YOU MUST CONSIDER: 1. If your company structure permits it; 2. Who will take over your business and if they are able and qualified to do so. For example, if you are a professional, are your children knowledgeable and experienced enough to oversee your business? Do they need the help of trusted advisors to guide them with decision making or the support of your more experienced staff in managing the day-to-day operations of your business? 3. The process for your children to take over running your business including how they will be supported through it and in taking on their new responsibilities; 4. If it is worth passing on shares now to reduce the Inheritance Tax liability and make it easier for your children to take over the running of your business. Sell Your Business If your business is to be sold, THEN YOU NEED TO CONSIDER: 1. Who will manage the business day-to-day until the sale is completed? 2. Is there enough money in the business to keep it running in the interim? 3. Who it will be sold to and do they have the sufficient funds to buy it? Your partners may want to buy your shares and a life insurance policy in trust can ensure that they have the funds to buy out your beneficiaries. 4. Does a buyer need to be found and if so who will find them? Is there someone (e.g. an accountant or solicitor) you trust to find a buyer and ensure the sale goes ahead? These are just some of the questions that you need to answer in your Will and legal business documentation. It is worth looking at your business structure now to ensure that your wishes can be actioned. TESTIMONIAL I was really impressed that Kathryn came to see us at home to discuss our Wills and also at the signing stage. Everything was clearly explained. Thank you. Isabel Wilson

5 3. Why Your Will Must Dovetail with Your Business Agreements PROBLEMS CAN ARISE IF YOU DO NOT ENSURE THAT THE PROVISIONS IN YOUR PARTNERSHIP/ COMPANY DOCUMENTS ALLOW YOUR WISHES TO BE RESPECTED. IT IS ALSO VITAL TO ENSURE THAT YOU KNOW WHICH ASSETS ARE OWNED BY YOU AND WHICH BY THE BUSINESS. THE DISTINCTION CAN CAUSE SIGNIFICANT ISSUES IF YOU GET IT WRONG. CONSIDER THESE COMMON EXAMPLES: 1. YOU LEAVE YOUR INTEREST IN A PARTNERSHIP TO YOUR SON WITH THE INTENTION THAT HE WILL BECOME A PARTNER IN THE BUSINESS. On your death, the partnership agreement is consulted and its provisions do not allow you to pass on your partnership share. Your surviving business partner has the option to buy your son out of his share, so he may only receive cash rather than become a partner himself. 2. YOU LEAVE YOUR COMPANY SHARES TO YOUR WIFE IN YOUR WILL THINKING THAT YOUR HOUSE IS A COMPANY ASSET. You leave everything else to your son from a previous marriage. On your death, it emerges that your house is not a company asset so it passes on to your son. This leaves your wife in a position whereby she needs to make a claim on the estate to stay in the house, and possibly dependent on the goodwill of your son. 3. YOU LEAVE A BUILDING IN YOUR WILL TO YOUR SPOUSE. On your death, it transpires that the building is an asset of your old business partnership. Your partnership agreement omits re-valuation provisions so your business partner has the right to buy your partnership share, including your interest in the building, from your estate at their original cost rather than their current value. 4.YOU LEAVE A GIFT OF YOUR FAMILY COMPANY SHARES TO YOUR SPOUSE IN YOUR WILL. On your death, it turns out that there is a clause in the company documents that says shares can only be left to direct descendants of the founder. The gift to your spouse fails. 5. YOU LEAVE YOUR INTEREST IN YOUR PROFESSIONAL PARTNERSHIP TO YOUR WIFE. You work with clients however your wife is not qualified to do so but you want her to be involved in managing the business rather than being bought out by your partner. You will need to have this situation covered in your shareholder agreement as well as your Will. Many business partners and owners set up their business, put the needed legal documentation in place and never look at it again. In some cases, they don t read it in the first place and, even if they do, many don t understand it. For example, the Memorandums and Articles for most companies are produced by internet company formation businesses. Few people read them and even fewer understand what they mean. It is vital that all your personal and business documentation dovetail with each other. We invite you to contact us to review these documents on your behalf.

6 4. Inheritance Tax and Business Owners PLANNING CAN HELP TO SIGNIFICANTLY REDUCE INHERITANCE TAX LIABILITIES CURRENTLY: 1. Gifts between spouses are free from Inheritance Tax regardless of their value. 2. You have an Inheritance Tax threshold of 325,000. Subject to any lifetime gifts, the value of any assets exceeding the threshold will be taxed at 40%. 3. Inheritance Tax reliefs of up to 100% are potentially available where the asset in your estate is business property. Business Property Relief (BPR) is a relief from Inheritance Tax of 50% or 100% for relevant business property. 50% may be available on quoted shares in a company. 100% may be available on unquoted shares in a company. 100% may be available on business properties, including land, buildings, plants and machinery, used wholly or mainly for business purposes. Relief does not apply to businesses that deal with securities, stocks, shares or property investment portfolios. You must have held these interests for at least 2 years before your death to benefit from BPR. TESTIMONIAL Yolanda was always professional, helpful and courteous at all times. The advice given was very considered and appropriate to our needs. A pleasure to do business. Tony & Liz Turner YOU COULD MINIMISE INHERITANCE TAX LIABILITY BY LEAVING YOUR SHARES OR BUSINESS INTERESTS TO YOUR CHILDREN OR OTHER BENEFICIARIES AND LEAVE THE REST OF YOUR ESTATE TO YOUR SPOUSE OR CIVIL PARTNER. If you leave everything to your spouse, then it is free from Inheritance Tax but when they die the beneficiaries will be left with a large tax bill. If you feel uncomfortable about leaving your shares or business interests to your children or grandchildren, then your Will should include a discretionary trust in relation to your business interests. This means that you make a gift of your business interests into a trust. Your Trustees have absolute discretion and flexibility about when to give your shares to your beneficiaries such as your spouse, children, grandchildren and anyone else you might wish to benefit. It is vital to give careful consideration to who the Trustees should be and you may wish to consider appointing a professional (such as a solicitor or accountant) who can remain neutral in any family conflict and has experience in dealing with these matters. You should also leave a separate Letter of Wishes for your Trustees to provide guidance about dealing with the business assets. A DISCRETIONARY TRUST IN YOUR WILL: Is flexible Protects your business interests from passing outright to children or grandchildren who may have marital or financial problems Maximises business property relief Keeps your options open in relation to succession planning for your business There are many options to consider. Else Solicitors can help you to make the choices that will minimise your Inheritance Tax liability while protecting your business.

7 5. What is a Lasting Power of Attorney? A Lasting Power of Attorney is a legal document which allows a person you choose, called your Attorney, to take over decision making on your behalf WHEN YOU ARE PHYSICALLY OR MENTALLY UNABLE to do so yourself. This could be if you had a stroke, needed a major operation, suffer from dementia or had been incapacitated in a serious accident etc. THERE ARE TWO TYPES OF LPA: 1. Health and Welfare LPA- this allows your chosen Attorney to make decisions about your daily routine, such as what you wear, what you eat, who can visit you and what medical treatment you receive. 2. Property and Financial Affairs- this allows your Attorney to either assist you in making decisions regarding your property and finances or, when necessary, take over dealing with your finances on a day to day basis. You can have a second Property and Financial Affairs LPA relating solely to your business. You can have a different Attorney for each LPA, e.g. your spouse could be your Attorney for Health and Welfare and your personal Property and Financial Affairs and your accountant for your business Property and Financial Affairs. Both LPA types are important and we strongly recommend that you get them both done at the same time. However, the Property and Financial Affairs LPA is vital for business owners. If this is not in place, then access to your business bank accounts may be denied meaning that suppliers, staff and regular bills will not get paid. FOR YOU TO PUT IN PLACE A PROPERTY AND FINANCIAL AFFAIRS LPA FOR YOUR BUSINESS YOU NEED TO: 1. Review your company s articles of association and partnership or shareholder agreements. 2. Identify a suitable Attorney. This should be someone you trust, who is able to do the job and understands your business. You can have more than one Attorney. You may want a trusted business associate who knows your business to negotiate contracts independently of your second Attorney, e.g. a family member. However, they can only access your bank account with the approval of your second Attorney. Care must be taken when drafting an LPA to appoint different Attorneys to deal with specific tasks. 3. Ensure your Attorney fully understands their responsibilities before they agree to be named in your LPA. This LPA allows your Attorney to make business decisions on your behalf, including using your business bank accounts, paying people, investing assets and dealing with your tax affairs. If you become incapacitated and do not have an LPA in place, then your partner or a family member must get the authority to make financial decisions and access your accounts from the Court of Protection. This can take 6 months or longer and costs around 2,500. The chances are your business will have disappeared before they can get access to your accounts. We can help you put LPAs in place to protect you, your business and your family.

8 meet the team KATHRYN CAPLE Head of Wills & Probate Direct Line: 01283 526230 E-Mail: kathryn.caple@ KATHRYN SPECIALISES IN AND HEADS UP WILLS AND PROBATE. Kathryn has been working as a private client solicitor since qualification and is also a member of the Society for Trust and Estate Practitioners (STEP). YOLANDA RIDE Wills & Probate Paralegal Direct Line: 01283 526203 E-Mail: yolanda.ride@ YOLANDA HAS A WIDE RANGE OF LEGAL EXPERTISE. Yolanda has developed her legal experience by working at a number of different law firms acquiring a great working knowledge in several areas of law. OTHER LEGAL SERVICES we OFFER PERSONAL & FAMILY SERVICES: Wills & Probate / Employment Law Advice / Dispute Resolution BUSINESS LEGAL SERVICES: Property / Commercial Dispute Resolution / HR & Employment / Business Law / Contracts / Terms & Conditions / Debt Recovery / Insolvency & Business Recovery / Mediation SPECIALIST SECTORS: Construction & Engineering / Healthcare / Pubs, Pub Companies & Breweries / Banking & Finance / Sports & Entertainment DISPUTE RESOLUTION EMPLOYMENT LAW BUSINESS SERVICE WILLS & PROBATE COMMERCIAL PROPERTY DEBT RECOVERY INSOLVENCY & BANKRUPTCY SPECIALIST SECTOR LEGAL SOLUTIONS FOR YOU AND YOUR BUSINESS First Avenue, Centrum 100, Burton on Trent. DE14 2WE Get in touch today: 01283 526 230