Wills for business owners

By James Beresford, head of Wills, Tax, Trusts and Probate at Slater+Gordon.

I am often asked whether business owners must make specific bequests of their business interests in their Wills. The simple answer is “no”: shares in a private limited company can pass to nominated beneficiaries under the residuary clause of the Will.

However, it may be preferable for the spouse not to inherit business interests directly, as this may mean they would have an involvement in the day-to-day running of the company and this could cause issues for other shareholders/directors. There is a solution to this problem, which is to make a specific bequest of the business interests (shares) to a Trust.

By using a Trust in the Will, the surviving spouse can benefit from the shares (i.e. receive the dividend income) but as they will not own the shares, they will have no involvement with the day-to-day running of the business. If the business is trading, then Business Property Relief for Inheritance Tax may be available.

A Trust also allows an element of legacy planning; it would ensure the assets can remain in trust for up to 125 years. This could prevent a situation whereby future generations could squander and put at risk all the hard work the deceased had invested into the business during their lifetime; thus giving rise to the old saying: ‘the first generation builds the business, the second generation makes the business and the third generation squanders the business’.