Death, the big sleep, the never-ending tomorrow. As much as we’d like to deny it, it’s coming for all of us.

Once you’re gone, you have no control over who gets your house and belongings. Your partner will most likely get most of your possessions, the rest will be divided amongst your children. If you have no surviving relatives who are in line to inherit your estate, it passes to the Crown.

While you’re alive, you have the chance to write a will to decide who gets what when you pass to the next life. Your favourite cousin gets your motorbike, your sister’s kids get the holiday home, and your ex-wife gets nothing.

Definitions

Executor: The executor is the person dealing with the estate of the person who has died. An executor is named in the will as responsible for dealing with the estate.

Power of attorney: A power of attorney is a written authorisation to represent or act on another’s behalf in private affairs, business, or in another legal matter.

Testator:  The testator is the person who has written and executed a last will and testament that is in effect at the time of their death.

Choosing your executor

When you write a will, you become a ‘testator’, and can nominate an ‘executor’. This is the person who is in charge of dealing with your affair. Choose your executor carefully, they are responsible for everything from closing bank accounts to liquidating assets. You should choose someone who you not only trust but is also able to carry out these activities. If you don’t choose an executor, the court may pick one for you.

The problem of succession

The Companies Act 2006 requires that all private limited companies in the UK must have articles of association and a memorandum of association in place. Articles of association are essentially formal rules about running the company, agreed upon by the shareholders of guarantors, directors and the company secretary. A memorandum of association is a legal statement signed by all the initial shareholders agreeing to form the company.

If you are thinking about succession in the case of your death and your company has other shareholders, you might want to organise a mechanism for the co-shareholders to buy out your estate. This will require a careful legal professional to carefully maintain Business Property Relief where possible. Business Property Relief means that you pay 0% Inheritance Tax on the value of your shareholding.

What happens when a sole director dies?

What happens when you meet your untimely demise and you’re a sole director and shareholder of a company? It’s an issue, Sole directors hold all of the power and legal authority to make big decisions for their company.

When a sole director dies (or loses mental capacity), company assets are frozen until a new director is named. Creditors and staff cannot be paid, and business operations are likely to come to a halt.

Writing a will

Lawyers advise that every business owner or shareholder of a business should put together a Will. They should make sure to update it if their circumstances change. The will shouldn’t contradict the articles of association.

Powers of attorney

Many believe it is advisable for a sole director to set up financial LPAs, in case they lose the mental capacity to make decisions about their company for themselves. You can appoint a suitable businessperson as an executor, purely for the management of the business (rather than personal financial decisions) through a bespoke document.

How can succession issues be avoided?

Sole directors and sole shareholders should ensure that the company’s articles of association provide for succession planning. The director should also outline in his Will the name of executors, compatible with the company’s legal charter. Good legal representation is required to ensure there is no conflict or omission.

Protocols should also be in place for a new company leader. If they aren’t, executors and beneficiaries of your will need to facilitate the deceased person’s personal representatives being added to the company’s register of members. This may take time and the business could suffer.

Storing your will

Your will should be stored in a safe space, that is accessible by loved ones if something happens to you. Consideration should also be given to keeping it dry and reducing the risk of damage.

Close friends and family need to know how to get to it, it’s no use having a super secure combination lock that no one except you knows the code for. It’s equally as bad to keep your will at the shed at the end of your garden that could get damaged by flooding.

If you’d prefer, you can also ask your solicitor to store it for you.

Making provisions for your passing

If you die without making a will, your estate will be divided according to intestacy rules, rather than your wishes. As a business owner, it is even more important that you make provisions now for when you pass on to your next life. Save time money and stress for your loved ones, and make sure your affairs are in order now.

Gain peace of mind, prevent the potential for business or family disputes and get it sorted.

At Eazitax, we always look after the interest of our clients, if you need more information on obtaining a will for your business, give us a call and we will point you in the direction of someone who can help.