Case study – Will provision for husband and wife business owners

Case study – Will provision for husband and wife business owners

In June 2015 I was introduced to a couple wanting to review their existing 2015 Wills, by their financial advisor who I had met at a networking meeting, to ensure their provisions were still ‘fit for purpose’.

The client’s situation

After an initial telephone consultation with the clients, and having conducted a review of their existing Wills and business provisions, I identified many areas of concern that had not previously been addressed.  I emailed them my summary of their current situation, my recommendations to update things, and the corresponding pricing to do it for them.  We met for a full meeting a couple of weeks later, after I had sent them a list of ‘things to consider and prepare’ for the meeting.

The clients were married, with two children, aged 20 and 18, four properties and a very successful family business. The husband and wife were the sole shareholders in the business, but were looking to reward five members of staff by giving them shares.  The husband ran the business, the wife was not involved in it. Their older child worked in the business at a junior level, while the younger child had no interest in doing so. The client’s net personal assets ran into many £millions excluding the value of the business (which should pass free of IHT) and their vast sums of life insurance (which would pass outside their Wills).

The clients existing Wills were ‘Standard Mirror Wills’ – leaving everything to the survivor, then to their children equally on 2nd death.  They contained no provisions to protect the deceased’s assets from unintended third parties – such as the survivor’s remarriage or care fees, and no provision at all to ensure the continuity of the business during or after the Probate process – which typically takes around 12 months.  The value of their estate was too high to qualify for any of the additional ‘Residence Nil Rate Band’ (RNRB), and there were no ‘IHT reducing’ provisions in their existing Wills.

They had no Lasting Powers of Attorney (LPAs) in place in the event either of them lost mental capacity, to protect either their personal assets or their business.  Nor were their Life Insurance policies set up to pay into Trust, so would add to the survivors estate on 2nd death for IHT calculations.  Their Company Shareholder Agreement made no provision for an Attorney under an LPA to make decisions for a mentally incapacitated shareholder, and included ‘pre-emption rights’ on death, which would mean the shares were immediately ‘up for sale’ at the time of death, so would lose their Business Relief from IHT…   

My recommendations

The solution I put in place for the clients to ensure their Will and company documents were fit for purpose included:

  • Working with their Accountant, Finance Director and Commercial Solicitor to update their Shareholder Agreement; adding powers for an Attorney under a Business LPA to make decisions for an incapacitated shareholder, removing the pre-emption rights in favour of a ‘cross-option’ to secure the available Business Relief from IHT on death, and protecting the company’s interest in the new minority shareholdings in the event the relevant new shareholder leaves the company or dies.
  • Drafting and registering a pair of LPAs – both ‘property & finance’ and ‘health & welfare’ for husband and wife, along with specific business ‘property & finance’ LPAs for them and the five new shareholders.
  • Redrafting their Wills to include several Trusts; for ‘IHT reduction’ purposes (as they will never qualify for the RNRB), and for ‘Asset preservation’ purposes (so their assets end up with their children not unintended third parties), and a Business Trust to hold half the company shares on 2nd death, to provide for the younger child who does not work in the business (to ensure this child does not have any voting rights, and the shares aren’t at risk from their unintended third parties).
  • Working with their Financial Advisor to ensure their multiple Life Insurance policies will pay out ‘into trust’ not into the survivors estate.
  • Checking the Land Registry Titles for each of their properties, and severing the ‘joint tenancies’ to ‘tenancy in common’ so the trusts in their Wills will be effective.
  • Drafting a robust Expression of Wishes Letter to explain everything that has been done, so their Executors and Trustees know exactly what needs to be done on each death – in plain English not legal jargon!

The result

The client was extremely pleased and reassured with everything I achieved for them, and left me a glowing 5* review stating that he ‘never knew such a service existed in this space’ – I think you’ll find it generally doesn’t!!  

To find out more about how I can help you, your family and friends, and add value to your client offering, please contact me via; or call 0845 519 7585, and I will be happy to discuss things further.

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