Wills and Trust Planning
Inheritance Tax Planning
Property Tax Planning
Business Owners Tax Planning

Entrepreneurs Protect Your Wealth!

Entrepreneurs Protect Your Wealth!

Entrepreneurs seeking to build and develop their businesses are understandably focussed entirely on their commercial objectives and too often forget about financial planning.  It’s entirely understandable as cash is often tight in the initial stages.  Spending money on lawyers to protect assets that may not be worth much at that stage could seem unnecessary.

Obviously no one wants to think about marriage breakdown or death particularly if you are a dynamic young business owner on the path to success.  However, it is important to do this at the earliest opportunity.

Protecting your personal assets through your commercial documents should be done when actually setting up your company.  That way the initial wording to protect your personal position can be woven into your commercial documents.

There is usually provision in the articles of association for what will happen to shares in certain circumstances including on death.  However, despite the UK having a divorce rate of about 40% it is rare for these agreements to state what will happen if the founder suffers a relationship breakdown.

Entrepreneurs are often advised by their accountants to gift shares to their spouse for tax reasons.  However there is often no consideration given to what happens to these shares should the couple split up.   If the shares carry voting rights this can be problematic so the ideal situation is that any such shares automatically revert back if you get divorced at any stage.

Governing documents can also contain pre-emption rights, so that any shares are offered to other shareholders, members or partners in the business.  This can be done in conjunction with a ‘keyman’ insurance policy which pays out to the other parties allowing them to purchase the shares from your estate.

Safeguarding assets for children should be a consideration too.  There are steps you can take to protect any property or money you have intended for the children in the event of a relationship breakdown.

Gifts in your Will could be left to a Trust managed by the family so they do not actually own the assets, or they could be made contingent upon the children reaching a certain age.   Gifts such as cash to buy a property or to use as a deposit for a property purchase can also be made as a method of reducing  your inheritance tax liability.  This gift could be made on the proviso that the child enters a pre-nuptial or cohabitation agreement.  Another option would be to use a trust to protect the cash.

Of course having a Will is a vital part of financial planning.   A basic Will together with a joined up approach in the corporate governance documents will usually be adequate.  However once assets are worth £500,000 and above it is likely that a more detailed version will required to ensure that your are wholly protected.

The key to efficient planning is to review your Will every 5-7 years, to make sure it is inheritance tax efficient and still meets your particular needs.  If your personal circumstances change then an annual review would be a wiser option.

A pre-nuptial agreement is a very practical tool but allow plenty of time for this to be prepared as they are tailored specifically to your needs now and in the future.  Such an important document should be completed at least 6 months before the wedding.

If buying assets abroad is your intention ensure you understand how these would be affected by death or divorce.   Find a UK lawyer specialising in international cases as they will have a good network of specialists in other jurisdictions and will work with you to ensure your wishes are carried out both abroad and back in the UK.

A significant part of being a successful entrepreneur is making informed decisions about your personal wealth and being prepared for any event in the future.  Taking professional advice from an experienced impartial estate planner is crucial.  Contact us now for the piece of mind that efficient estate planning brings.

 

 

 

 

 

 

 

 

 

 

 

 

 

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