As a business owner, it almost goes without saying that you need to ensure your business is protected from unforeseen circumstances.  You may have already taken steps to protect it, such as obtaining key person insurance, arranging an appropriate overdraft facility with the bank and having a good shareholder / partnership agreement in place.

In our experience hard-working business owners are usually very good at dealing with the financial aspects of protecting their business, but tend not to consider their absence as a serious possibility, so make limited preparations for the operational impact.

The reality is that anyone can become incapacitated at any time through illness or accident, so it makes sense to prepare for that possibility.  Depending on the length of time you are out of action, the consequences for your life may be minimal, but the consequences for your business could be more significant.  For example:

• If you are the only signatory for payroll, what will happen if you are unable to sign for the foreseeable future?
• How will the business operate if a Co-Director is unable to co-sign contracts or guarantees?

What is a Business LPA? 
A Business Lasting Power of Attorney (LPA) is an effective way of protecting your business from the operational impact of sudden and unforeseen absence.

As with  all LPAs, it is a legally binding document, which assigns one or more trusted people to help you make decisions or to make decisions on your behalf.  These trusted people are called Attorneys.  For more details on Lasting Power of Attorneys please see Lasting Powers of Attorney.

A Business LPA deals with business assets only and should appoint an Attorney with the requisite qualifications and abilities to manage your business for you for a sustained period if necessary. For example, if you are a dentist running a dental practice, then appointing your spouse who has expertise in say, retail, is not going to be suitable.  Rather, partners of your dental practice or other such professionals would be better suited to managing your practice.  It is important to note that some industries impose regulatory restrictions on who can manage a business within that profession.

Business LPA’s can be as detailed as you like and can appoint multiple Attorneys to handle different areas of the business.  They provide a platform for you to explain to your Attorney(s) exactly how you would like your business to be run and what they should do with it in certain sets of circumstances.  This may include the way in which they continue to keep it going whilst you are unable to, or the steps you would like them to take to close the business by way of sale, transfer or otherwise.

Your Business LPA should also give permission to your Attorney(s) to employ the services of other professionals, generally or specifically, to assist them.  As, for example, if you have a financial advisor who usually helps you with certain investments, they will require your express permission to liaise with your Attorney or they would be unable to continue managing your investments without a court order.

Are There Other options?
Another way in which this can be addressed is by putting in place a Property and Financial Affairs Lasting Power of Attorney in which you appoint an Attorney who would be responsible for looking after your interests in your business.

However, a Business LPA ensures an appropriate separation between your business and personal affairs so that you have the right person looking after each aspect of your life.  Putting in place a detailed business LPA will ensure that your business interests continue to operate smoothly in the event that you are unable to manage them yourself.  You might consider making it a prerequisite for all company stakeholders.

In addition to a Business LPA we also recommend that business owners consider succession planning and prepare a detailed Business Will to preserve their business and personal interests should the worst happen, you can read more about succession planning and Business Wills here.

LEGAL ADVICE

For more information on preparing a detailed and effective Business Lasting Power of Attorney to protect your company contact Sangeeta Rabadia.

The kind of succession planning that requires a Will is unlikely to be on your mind when you start a business; but it is important if you hope the business will continue as a legacy, or have any kind of business interests that you would like to pass to loved ones.

Wills have always been an important part of succession planning for business owners and investors.  Without a Will to direct how your professional interests should be managed, your business could face immediate operational issues and your estate may be dealt with in a way which depreciates its value.  Effective succession and inheritance tax planning ensures that when the time comes, assets are passed on to the right people in a way that maximises the available tax reliefs.  We call Wills which contain important directions regarding business and professional interests, Business Wills.

In this blog we review the key considerations for business owners and anyone holding business interests, such as stocks or shares, when preparing a Business Will.

Key Considerations for Business Owners
The most common business types are sole traders, partnerships and incorporated companies.  Depending on the businesses structure, documents such as shareholder agreements, partnership agreements and articles of association usually set out the basis for how it is owned and managed.  It is also possible for these documents to dictate what happens to each owners’ share in the business should they die.

In our experience, these terms are often draconian, leading to forced buy outs, depreciation of value and occasionally even dissolution of an owners share with no benefit to their heirs.  It is therefore important to ensure there are adequate business documents with appropriate options for your heirs and surviving business associates to consider on your passing.

It is also important that you deal with your business properly within your Will to ensure that it is administered effectively and passed to your intended heirs.  The contents of your Will should reflect the options contained within the business documents and provide heirs with the appropriate legal route to maximise the value of their inheritance.

Below are examples of some of the things you should consider:

• Should you appoint executors who are solely responsible for the administration of your business? While you may prefer for family members to deal with your personal assets, it is often more appropriate for business partners or other professionals such as solicitors to deal with business assets. This can be particularly important if you would like the business to continue operating.
• Do you need to assign trustees to manage business interests for minors? If your beneficiaries are minor children they are not going to be able to manage the business themselves or make decisions as to whether they should retain or sell their share.  You could consider setting up trusts or other structures to ensure their interest in the business is looked after by competent people until they can take over themselves.  This ensures that the business can continue to operate smoothly and that practical day to day matters can be addressed with ease.
• Are any of your beneficiaries vulnerable? For vulnerable beneficiaries who may never be able to manage the assets themselves, it is important to ensure that a long-term structure is put in place to protect their interests.  You could consider whether to set up a trust or appoint an appropriate deputy to act on their behalf.  You might decide it is more appropriate for the business, or your share, to be sold and proceeds then held for the beneficiary.  Whatever you choose, it is important that your Will provides for the mechanism in which your wishes can be carried out.
• Would you like your employees to receive a share of the business? It is not uncommon for small business owners who have grown their company with a loyal team to want some or all of their employees to receive some value from the business.  In this situation you might consider an employee share scheme or a more general share in the profits.
• What are the tax implications? As with other assets, the value of your business may be subject to inheritance tax.  A qualified professional can help you consider what reliefs may be available to your beneficiaries, what you can do during your lifetime and what you can do within the terms of your Will to maximise these tax reliefs.  For example, we worked with a client who sold his marketing company for a large sum, which had obvious benefits to him in life, but negated the availability of business property relief on death.  We subsequently advised and assisted him in the investment of the sale proceeds into vehicles which would qualify for tax reliefs when he died.  We can also assist you in managing your personal taxes, such as Income tax and Capital Gains Tax, which are linked to your profit share from your business interests.

Other Business Interests
The above considerations are not just important for people who own a business.  They are also necessary if you have business interests such as rental properties, investment portfolios and other stocks and shares.

The way in which these assets are owned will have just as much impact on how they are inherited and how much inheritance tax is paid on your death.  For example, rental properties will not necessarily qualify for special inheritance tax reliefs.  An effective solicitor can help you structure your portfolio to not only maximise the use of tax reliefs during your life time, but also ensure a smooth transition to your beneficiaries so that they do not pay more inheritance tax than they need to.  At Allard Bailey Family Law, we achieve this with a combination of lifetime planning and implementation as well as succession planning through effective Wills.

A Special Note on Investment Portfolios
Investment portfolios are often held in a variety of structures, depending on what your financial advisor believes to be most effective for each investment.  If your advisor does not have an overview of your entire estate, it may mean that you minimise your liability for one tax, whilst inadvertently increasing the liability for another tax.  It is therefore advisable for your entire estate and holdings to be reviewed periodically.

You should also be aware that if your investments are held in trust they will fall out of your estate so you cannot dictate how these assets are dealt with in your Will.

LEGAL ADVICE

To ensure that your wishes can be carried out in the best way for you and your beneficiaries, it is advisable to seek professional advice when considering how to plan the succession of your business and other investments.  It is also advisable to prepare a detailed Business Lasting Power of Attorney to protect your business in the event of unforeseen absence caused by sudden incapacity.  For more information on how we can assist you please contact Sangeeta Rabadia.

Challenging Wills is not a new concept, but it has become more common in recent years.  This is due in part to the rise in complex family structures as well as the steady increase in property values, which makes the possibility of a successful challenge more tempting.

It might not be something that you want to think about, but if it is possible that your final wishes could be challenged there are steps you can take now to reduce the risk.

The most common challenges to Wills are for want of mental capacity and/or undue influence so we will focus on how to protect against these.

Lack of Mental Capacity
When you give instructions and then execute your Will, you will need to know what you are doing and understand the full implications of your actions.

In legal terms this broadly means you, the Testator (person making the Will), will need to:

• Understand that you are making a Will and how a Will works
• Understand what assets and liabilities you have and what you are gifting in your Will
• Appreciate how others will be affected by the contents of your Will and that you will be expected to make provisions for certain people
• Not have a disorder that affects your mind causing you to dispose of your assets in a manner that you would not otherwise do so

Mental Capacity is a complex area as it is possible for you to have capacity for certain matters and not for others, for example if you have periods of lucidity making it difficult to know when it is the right time to take instructions or execute your Will. Sometimes, the issue of capacity may not be obvious and that can make the job of the Will writer very difficult.

It is these complexities that often lead to questions being raised after the Testator dies. If a serious question of capacity is raised, it will be for those beneficiaries wanting to rely on the Will to prove that you did not lack mental capacity when you executed your Will.

How can I Protect my Will from Challenges for Lack of Mental Capacity?
An important step is to use a professional Will writer.  A good practitioner will always ask appropriate questions during the initial meeting to establish whether there may be any concerns about your mental capacity.

If there are concerns, they will follow the ‘Golden Rule’ and an appropriate medical practitioner will be asked to assess you and determine whether you are able to execute a Will.  The medical practitioner will be encouraged to act as a witness when the Will is signed, but this is not always possible.

If you anticipate a dispute then it is a good idea to speak to a medical practitioner anyway and have the discussion recorded in medical logs or reports, which can be used as evidence by your intended beneficiaries if necessary. It is worth noting that records detailing your health at the time the Will is executed will always be useful evidence, even if mental capacity is not considered to be an issue at that time.

We recommend that you regularly review your Will with your practitioner to demonstrate that you have not changed your mind during the passage of time.  If there are significant changes to a Will, then there should be a detailed discussion as to why those changes are being made and this discussion should be noted on the practitioner’s file.

If you feel comfortable in doing so, you should also have open and frank discussions about your wishes and the contents of your Will with beneficiaries, friends and family.  If they are aware that your wishes have been consistent or understand the reasons for any changes it can reduce the likelihood of challenges.

Undue Influence
A Will is a record of your, the Testator’s, wishes of how you want your estate distributed after your death. It is for you to make those choices and no one else. If anyone else makes or influences those choices the Will cannot be valid. The most obvious example of undue influence is when someone forces you to leave assets in a specified manner for fear for repercussions, such as being told you will not be looked after properly, threats of abuse, threats of being disowned and so on.  This can be especially terrifying for the elderly and vulnerable.

The examples above are transparent but undue Influence is not always this obvious, another example would be causing you to have untrue beliefs about a proposed beneficiary.  A recent matter that we assisted on involved of a father who was made to believe that one of his sons was not taking care of him properly, which led him to exclude the son from his Will.  This kind of undue influence is known as fraudulent calumny.

How can I Protect my Will from Challenges of Undue Influence?
A good practitioner will always ask to see you on your own so that you are free to speak openly without reprisal.

They will also have discussions with you to ensure that any changes to your Will are rational and properly considered and that you fully understand the implications. If there are any concerns a practitioner will refuse to act and may even report their suspicions to the appropriate authorities.

Unfortunately, undue influence can be hard to notice so you should be open and frank with your practitioner, who will note the conversation in their records.  If it is feasible, a discussion with any family about your wishes is also encouraged.  Not only will this show there is no undue influence, it may also prevent any disputes or animosity after your Will is read.

Challenging Wills made during the Pandemic
The COVID-19 pandemic has caused many people to think about the importance of Wills.  At the start of lockdown there was a 70% surge in Will instructions. However, the need for social distancing has meant that taking instructions and executing Wills has been problematic for some.  Video or telephone calls with a practitioner may get the job done, but it does make it harder to identify issues and this could lead to problems when your Will has to be used.

If you have executed your Will during this pandemic period and have any concerns about future challenges, we recommend that you get your will reviewed once you are able to meet with a practitioner in person.

LEGAL ADVICE

At Allard Bailey Family Law we regularly assist in drafting Wills where there are complex or sensitive wishes and can help you to protect your intended beneficiaries from unwarranted challenges, as well as defending them should disputes occur.

To book a consultation or telephone appointment, please contact Sangeeta Rabadia on 020 7993 2936.

While many people find it liberating to come out, others prefer to keep their sexuality and relationships private.  This is a personal choice made for many different reasons and should be respected; but there can be issues if your family is surprised, or upset, to find your partner included in your Will.

In these circumstances it is not uncommon for family members to challenge a Will, which can leave your partner in a vulnerable position.  How can you ensure your wishes will be carried out and your partner will be provided for if your family does not know, or does not respect, that you are in a same-sex relationship?

Two of the most common reasons for challenging a Will are for want of mental capacity and/or undue influence, so we will discuss specific steps you can take to protect your estate from challenges of this nature.

Challenges for Undue Influence
Your Will is a record of your wishes as to how you want your estate to be distributed after your death and who you would like to be responsible for making it happen. It is for you to make those choices and no one else.  If anyone else makes or influences these decisions, your Will cannot be valid.  Family members who are not aware of, do not like or do not understand a person’s relationship, have been known to challenge a Will because they believe there was undue influence from their partner.

The most obvious example of undue influence is when someone forces you to leave assets in a specified manner for fear of repercussions.  These may include, threats of abuse, being disowned or neglected, being told you will not be looked after properly and so on.

Undue Influence is not always that obvious, it also includes actions causing you to have untrue beliefs about a person or group of people.  Misguided family members may wrongly believe that that they are justified in making such allegations if they believe your partner has turned you against them, your culture or faith.

There are some simple steps you can take minimise the chances of challenges of this nature being successful:

1. Instruct an independent practitioner to advise on your Will. A good practitioner will always ask to see you on your own to ensure you can speak openly without reprisal and will be able to confirm that this was the case.  They will also have discussions with you to ensure that any changes to your Will are rational and properly considered and that you fully understand the implications.
2. Make your wishes known. If it is feasible, a discussion with family members about your wishes is encouraged.  Not only will this show there is no undue influence, it may also prevent disputes or animosity if there is someone who can inform others about your relationship and intentions on your death, so there are no unexpected surprises when your Will is read.
3. Prepare a Statement of Intent. If you foresee issues, it can be wise to provide a more detailed statement of your wishes to accompany your Will, explaining the reasons you wish to distribute your assets in this way and providing any additional instructions for your executors about how to respond to challenges.
4. Write personal letters. Depending on the reasons you foresee issues, you might also choose to write letters to be given to certain people in the event of your death requesting that they respect your wishes, even if they are unable to understand them.

Challenges for Lack of Mental Capacity

When you give instructions and execute your Will, you must know what you are doing and understand the implications of your actions.

In legal terms this broadly means you, will need to:

• Understand that you are making a Will and how a Will works
• Understand what assets and liabilities you have and what you are gifting in your Will
• Appreciate how others will be affected by the contents of your Will and that you will be expected to make provisions for certain people
• Have no disorder that affects your mind thus causing you to dispose of your assets in a manner that you would not otherwise do so

Mental Capacity is a complex consideration as it is possible for you to have capacity for certain matters and not for others, for example if you have periods of lucidity making it difficult to know when it is the right time to take instructions or execute a Will.  Sometimes, the issue of capacity may not be obvious and that can make things difficult.

It is these complexities that often lead to questions being raised after a person dies.  If a serious question of mental capacity is raised, it will be for your partner and any other beneficiaries who want to rely on the Will to prove that you did not lack capacity when you executed your Will.  There are some steps you can take to help them:

1. Instruct an independent practitioner who will follow the Golden Rule. If there are concerns, a good practitioner will follow the ‘Golden Rule’ and instruct an appropriate medical practitioner to assess you and determine whether you are able to execute a Will or not.  The medical practitioner will be encouraged to act as a witness when the Will is signed, but this is not always possible.
2. Ensure everything is recorded. If a dispute is expected it may be a good idea to speak to a medical practitioner anyway and have the discussion recorded in medical logs or reports, which will be useful evidence.  Any records detailing your health at the time the Will is executed will always be helpful, even if mental capacity is not considered to be an issue at that time.
3. Make your wishes known. If you feel comfortable in doing so, you should have open and frank discussions about your wishes and the contents of your Will with beneficiaries, friends and family.
4. Prepare a letter of wishes. You could also write a letter of wishes to explain the rationale behind the contents of a will where mental capacity could be an issue. This helps the court understand the trail of thought and see if it has been influenced by a mental disorder.
5. Review Your Will Regularly. If you review your Will with your practitioner, it will demonstrate that you have not changed your mind during the passage of time.   If you wish to make significant changes to your Will, there should be a detailed discussion as to why those changes are being made and this discussion should be noted in the practitioner’s records.

LEGAL ADVICE

At Allard Bailey Family Law we regularly assist in drafting Wills where there are complex or sensitive wishes and can help you to protect your intended beneficiaries from unwarranted challenges, as well as defending them should disputes occur.

To book a consultation or telephone appointment, please contact Sangeeta Rabadia.