For business owners, estate planning is more than a personal matter; it’s a critical step in safeguarding the future of your business, family and key assets. Business structures, shareholder arrangements, tax reliefs and incapacity planning must all be considered to protect and pass on business interests efficiently. A robust estate plan provides clarity, continuity and control at a time when it’s needed most.
- Securing the Future: Drafting a Will That Covers Personal and Business Assets
A recent survey by Society of Trust and Estate Practitioners (STEP) revealed that only 32% of family business owners in the UK have an up-to-date Will. The majority, therefore, have not formalised their succession plans, potentially leaving their businesses vulnerable to legal complications and disputes upon their passing.
The same STEP survey found that 69% of family business owners do not have a succession plan detailing the future ownership and management of their business. This lack of planning can lead to uncertainty and conflict among heirs and stakeholders, jeopardising the continuity of the business.
A legally valid Will is the cornerstone of any estate plan. For business owners, it must go further than simply distributing personal assets. Shares in a private company, intellectual property and trading assets should be clearly addressed. Without a Will, intestacy rules apply, which can delay probate and cause uncertainty for the business and beneficiaries. Under English law, appointing an executor who understands the business or has professional support is essential. By carefully detailing how business assets should be handled, a Will ensures continuity and prevents unnecessary disputes or tax inefficiencies.
- Business Continuity: Shareholder Agreements and Cross-Option Arrangements
Where a business is co-owned, a shareholder agreement or partnership agreement should outline what happens if one party dies. These documents ensure that control remains within the agreed hands, and that the deceased’s family receives fair value. A common strategy is a cross-option agreement, often backed by life insurance, allowing surviving shareholders to purchase the deceased’s shares. This avoids shares falling into the hands of unintended beneficiaries or triggering costly court proceedings. Agreements should be regularly reviewed to reflect changes in ownership, company valuation or family circumstances.
- Using Trusts to Protect Business Assets and Preserve Control
Trusts are a powerful tool for asset protection and succession planning. For business owners, placing shares into a discretionary trust can ensure long-term control while providing financial support to beneficiaries. Trusts allow a settlor to separate control of business assets from day-to-day ownership which is particularly useful where beneficiaries are not ready or suitable to take on business responsibilities. Trustees, manage and distribute the assets in accordance with a letter of wishes or trust deed. Trusts can also protect assets from external claims, such as divorce or bankruptcy and help preserve family wealth across generations.
- Maximising Tax Efficiency: Business Property Relief and Other Allowances
Business Property Relief (BPR) is one of the most valuable inheritance tax reliefs available to business owners in the UK. It currently offers up to 100% relief on qualifying business assets, such as shares in an unlisted trading company, provided the owner has held them for at least two years before death. This relief can make a significant difference to the inheritance tax liability on an estate. However, the business must be trading, not primarily investment-based, to qualify. Combining BPR with the nil-rate band, lifetime gifting, and pension planning can create a highly efficient estate structure that supports wealth preservation.
However, it is also important to note that from April 2026, proposed changes to BPR will introduce a £1 million cap on full relief, with any business assets exceeding this threshold potentially subject to a 20% inheritance tax. This highlights the urgent need for business owners to review their estate plans.
- Preparing for Incapacity: Powers of Attorney for Business and Financial Control
Planning for incapacity is just as important as planning for death. A Lasting Power of Attorney (LPA) for property and financial affairs allows a trusted individual to manage business and personal finances if the business owner loses mental capacity. In some cases, a business-specific LPA may be more appropriate, especially where the business structure is complex. Without an LPA, a deputy must be appointed by the Court, a costly and time-consuming process that may leave the business without leadership in a critical moment. LPAs ensure continuity and help protect business value during periods of incapacity.
Conclusion
Estate planning for business owners is multi-faceted. A tailored Will, strategic use of agreements and trusts, effective tax relief planning and robust incapacity arrangements all contribute to a secure legacy. English law offers flexible and powerful tools, but they must be used wisely. With the right strategies in place, business owners can protect both their enterprise and their loved ones, ensuring the smooth transfer of wealth and leadership for generations to come.
Next Steps
If you’d like to speak to one of our advisers about your estate planning, please click the link at the top of this page to book an appointment.
