What Is The Legacy You Want To Leave?
8th October 2019
The Responsible Business Owner - Part 5
The sad fact is, we are all going to die. I’d love to say otherwise but…
When you started your business was it in your mind to leave a legacy? A business to hand on to your daughter? Or to ensure your son has an inheritance to make his future easy?
Perhaps the legacy is the business itself?
Business and Sons Ltd
If you want to hand on to a son or daughter you need to be planning ahead. First of all make sure you ask whether taking over from you is what they want too?
If so, there are things you can be doing to lay the groundwork:
- Get systems in place so it is easy to see how the business works and it is easy to hand over. If most of the important information is in your head, start getting it down on paper. This really matters – otherwise you are never going to be able to leave (and if you do die suddenly, it may be impossible for anyone else to take over).
- Create clear roles for each of the children. Each needs to have specific responsibilities which don’t overlap (remember how they squabbled as kids over the crayons? That’s NOTHING compared to conflict in the running of a business!!)
- Plan out how will decisions be made between shareholders if more than one offspring is taking charge – and if you intend to remain a shareholder too. There is a balance between day-to-day decision making (you do not want to have to come in to vote to decide what brand of coffee to have in the company kitchen) and those that need shareholder approval.
And, hardest of all, decide how involved you intend to remain. This could be a phased process – slowly handing over to the next generation – but be sure you are able to fully step away when that time comes. Once you have handed over, leave them to do it their way.
Whatever you plan to do with the business, inheritance planning matters.
When you die, how will the family be taken care of? This is, of course, important when they are young but it is also worth considering in later life.
Inheritance tax planning and vital details like making a will (so, so important) make a huge difference to the legacy you leave to your family – and how much of it ends up in the hands of HMRC.
It is also worth making sure you have planned out what happens to the business as you can get 50% or 100% Business Property Relief against Inheritance Tax for a ‘qualifying trading’ business depending on what provision you have made.
Remember too, to declare what you want to happen to your pension. You can usually do this online with your pension provider.
And if you don’t die…
If you want to leave a legacy for your loved ones, then you also need to think about how you will be cared for should you need residential or ongoing medical support. Long-term social care is expensive: the average you might need can be £35k for men and £70k for women. If you haven’t prepared for it then your inheritance could dwindle and leave very little for the next generation. You can’t currently get insurance for longer term care so you need to consider other ways to protect some of your equity in order to leave it for the next generation. These include:
- Some types of annuity
The key message in all of this is that you need to plan now and to take responsibility for one of the few certainties in life.
To find out more about our business services, including lifetime responsibility planning, contact us to arrange an initial meeting.