'Everyone needs a will - but for business owners it's absolutely crucial'

EVERYONE NEEDS A will, and this becomes even more crucial if you have much of your wealth – and your family’s source of income after your death – tied up in the family business.

As a business owner or part owner, you need to think about how your share can passed on to the next generation or sold when you die for a fair price. Without a will, your business or shares in your business may be sold, your business may be broken up, or it may fail, because of a lack of foresight.

If you die intestate – without having made a will – all of your assets, both personal and business, will fall under the laws on intestacy set out in the Succession Act, 1965 which can result in unwanted consequences.

Imagine the following scenario: Parents and their two adult sons run a solid family business. They intend to pass on their business to their sons in their wills and to leave the remainder of their estate to their daughters.

The family have discussed this outcome and, bearing in mind that the two sons are taking less than a market wage in the knowledge that one day the business will be theirs, all agree that the parents’ estate planning is fair.

Unfortunately, both parents die unexpectedly without having made wills, and the laws on intestacy dictate that all four children have an equal entitlement to their parents’ estate. To realise their full share, the daughters insist that the family business is sold.

The upshot is that the business is sold, the sons are now employees and the siblings do not talk to each other. An unnecessary legacy of grief created by lack of planning and an assumption that people will honour agreements that are not legally binding.

To make matters worse, no one would be able to claim business relief and the full rate of Capital Acquisitions Tax would apply.

If you have business assets, expert advice should be sought from a solicitor or tax professional to reduce the tax payable by beneficiaries and ensure the smooth transition of your business to new owners or the next generation.

If you have children and have not made a will, they may inherit a valuable company they’re not old enough to manage or they may lack sufficient business acumen to either run or sell the enterprise.

If you make a will, you can create a trust appointing guardians and trustees for minor children who can act until such time that they are competent to meet the task, if desired.

Similarly, if you have a family business that is dependent on the personality or profession of the owner, it may not be viable to pass it on to the next generation.

This scenario applies to many service providers such as solicitors, dentists, doctors and accountants, whose aim is to generate as much income as possible while working and to wind up the business at the end of their working life.

If this is the plan, it should again be intentional and planned when, for example, renewing a leasehold interest in a business premises or arranging continuing liability insurance.

Making a will is an essential part of business planning and not only you should do so but your employees should be encouraged to do the same.

Bernadette Parte is a solicitor and the principal at Dublin’s Parte & Associates. This week mark’s My Legacy’s Best Will Week.

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