Why You Need A Will If You're Running A Family Business

• Published date: 01 April 2022
• Subject Matter: Corporate/Commercial Law, Tax, Family and Matrimonial, Corporate and Company Law, Inheritance Tax, Shareholders, Wills/ Intestacy/ Estate Planning
• Law Firm: Gorvins Solicitors
• Author: Mr Michael Smoult

In many ways, family businesses sit at the heart of commerce in our country. From small scale business-to-consumer outfits to larger business-to-business models, family businesses deliver vital products and services that make the UK one of the richest and most diverse markets in the world.

By their very nature, family businesses are often personable, customer focussed, and values-driven. A business that's kept within a family over generations becomes known in their local communities, oftentimes bringing significant commerce to an area, providing much-needed jobs and vocations for the local community.

As many benefits as there are to a family business, complications can arise when shareholders pass away. In this short blog, we're going to look at the importance of having a will in place for when you or another shareholding family member passes on.

The importance of a family will

When you run a family business spanning multiple generations, it's inevitable that you'll need to one day deal with the death of a shareholding family member. When that unfortunately happens, you can be left in a situation where that family member does not leave instructions for their estate.

Each generation operating in the family business will also have their own family - husband/ wife/ partner/children - that they want to look after too, so consideration needs to be given to both personal assets and the family business.

Alongside the grief and stress that accompanies the death of a family member, complications over their shares are an unwelcome additional stressor.

For that reason, it's important for you, your family and for your beneficiaries that you have a clear will in place dealing with personal assets and making sure that any interest in the family business is clearly addressed in either or both the will or the company's constitutional documentation.

The intestacy rule

Where someone dies without a will, their estate will pass via intestacy rules. What this means will differ depending on the circumstances of the person in question.

Much of the time, this will mean the shares will pass to that person's spouse or their children. However, the intestacy rules have a split whereby the first '270,000 is for your spouse and the remainder is split equally between your spouse and your children. Given the value of shares in a family business may be substantial, a likely occurrence could be that any such shares are split between your spouse and children.

The rules also do not cater for...