Capital Gains Tax – Take steps now to avoid a likely “tax grab”?
But while they are busy making their billions, how often do they stop and think: what is my exit strategy? How can I pass this on to my children and take a step back? How can I hand over the reins?
From my experience, as a private client lawyer regularly advising entrepreneurs on the succession of their business, the answer is not very often, or more to the point, not often enough.
Now not every entrepreneur is a Logan Roy of Succession figure: playing his children off against each other but never having any intention of relinquishing control. Albeit, I have seen some less extreme similarities.
If someone has worked hard to create something and it has made them rich, this wealth has defined them and allowed them to control their surroundings, their family, their employees, their image. Their children have not had to work quite as hard and may not have the same drive, so why should they take over the reins, why should they take all the glory.
Well, the simple answer is that when a founder entrepreneur dies or loses capacity, the business greatly suffers. A recent survey says that business revenue can suffer losses of on average 60% and have a 20% better chance of going bust.
So, this is something that they should take very seriously as all the work they have done during their lifetime can come unstuck very quickly if there is a badly planned departure.
The first key consideration with an exit strategy is it is never too early to plan and take professional advice, whether legal, accountancy and financial. It is important to understand the impact of death and how the finances and legals of the business would run if this was to happen.
Early advice allows for the correct structures to be put in place such as wills, trusts, holding shares or simple share gifting. It also allows for the entrepreneur to educate their family on the business and maybe get them involved in some aspect of it.
Rather than keeping the family in the dark about this planning, it is important to have regular family meetings to share plans. The one key connector between families who have orchestrated successful transitions is communication. Those who talk, debate and sometimes disagree, are often the ones that get it right.
Those who bury their heads in the sand often end in disaster.
Control freaks will find this particularly hard and often the title and control afforded to them gives them relevance as they get older. This importance of this should never be underestimated, so while the founder should look to relinquish control, the children should not get angry when this takes a little time.
Never has the maxim – fail to prepare, prepare to fail – been truer for business owners and their succession. If they are in two minds, just think about how bad it looks if after your death if your legacy crumbles through lack of planning rather than the incompetence of your family.
This article was originally published by Transmission Private.
For more information on the issues raised in this blog, please contact a member of our Private Client team.
James Ward heads the Private Client team at Kingsley Napley and is tasked with overseeing the continued development of the private client offering for both existing and new clients of the firm. His objective is for the Private Client team to offer the highest quality legal, practical and commercial private client advice for both domestic and international families and individuals.
Partner and Head of Department
Deputies are typically appointed because individuals cannot make decisions for themselves due to illness, like Alzheimers or dementia, old age or perhaps as a result of a catastrophic personal injury or medical negligence.
There are several reasons why someone may need the assistance of a financial deputy, stemming from incapacity due to an accident or a consequence of old age. There is however a darker side to this type of work that Court of Protection lawyers are seeing more and more of. This relates to those who have suffered some form of financial abuse and/or undue influence.
After a spinal injury the long-term impact on your life and that of your families can be significant. You may need a care package, a new home or adaptations to their existing accommodation, therapies and specialised equipment.
The pandemic has changed the world – there is no doubt we are all “online” far more now than before. Social media now extends into every aspect of our lives, from those notorious repetitive baby pictures to those ‘should never have been posted university photos‘. We collect and share moments of our lives in the digital world.
In the latest edition of the Financial Times Money Q&A, Jemma Garside, senior associate in our private client team answers a question: "Should I set up a joint lasting power of attorney for my mother?"
Subject to any restrictions or conditions in the Lasting Power of Attorney (“LPA”), a property and affairs attorney can make gifts on the donor’s behalf to the donor’s friends, family members or acquaintances on customary occasions.
Going through a divorce process is stressful. There are lots of things to think about and one of these is likely to be what you should do to protect your hard-earned money.
A donor must have the mental capacity to make a Lasting Power of Attorney (“LPA”) for property and affairs and health and care. The completed LPA is then sent to the Office of the Public Guardian (the “OPG”) for registration. Each page of the registered LPA will be stamped with ‘VALIDATED-OPG’.
As a business owner/shareholder, what would happen to your business if you were unable to make decisions – would someone be able to authorise payments or enter into contracts and keep the business running?
Lasting Powers of Attorney (LPAs) are vitally important documents. Our previous blogs have touched upon what LPAs are and top tips for anyone planning on putting an LPA in place. Most individuals should at least put in place a financial LPA to cover their home and personal finances. It is however a good idea in some cases to have a second financial LPA.
The last 12 months have put an awful lot of pressure on the family unit and sadly this has led to a spike in separation and divorce amongst married couples. With the end of the tax year fast approaching (last day Monday 5th April – Easter Monday) it is timely to consider the tax consequences of separations.
Whilst managing the property and affairs of another person a Deputy appointed by the Court of Protection may come across issues that require them to pay for legal advice and assistance on their behalf. Examples could include purchasing a property, challenging a care plan or obtaining advice about a dispute.
Partner and head of our Private Client team, James Ward, writes about the importance of entrepreneur's putting in place a succession plan to safe guard their reputation.
LPAs are important, and are steadily growing in popularity as individuals realise how necessary they are to support friends and family in the event that they lose mental capacity. Our previous blog gave an overview of how LPAs work and the requirements for making them. This time, we focus on our ten top tips for LPAs.
A Power of Attorney is a very important estate planning tool, especially when an individual loses capacity. Whilst the term ‘Power of Attorney’ seems to be thrown around a lot, it is often misunderstood or not used correctly. In fact there are several different kinds of powers of attorney that can be used for different purposes.
As we find ourselves in another national lockdown, the New Year presents an opportunity for individuals to review their assets and conduct some succession planning.
Phoebe Alexander and JIm Sawer blog about lasting powers of attorney and engaging Discretionary Investment.
Big news was announced by the Government at the end of last month: legislation will be introduced to allow remote electronic witnessing of wills – including for some that have already been made – in a significant amendment to the long-standing requirements. However, it will only be temporary.
Chancellor Rishi Sunak has asked the Office of Tax Simplification to review Capital Gains Tax (“CGT”). CGT is charged on the profit/increase in value on sale or gift of assets. The rates are 18%-28% on disposals of residential property and 10%-20% on other assets. There’s an annual exemption of £12,300 per taxpayer. Disposal of your main residence is tax free and “Entrepreneurs Relief” may see the first £1million of the gain on the sale of a business charged to CGT at the lower rate of 10%.
On the death of a person known to have made a Will, it’s pretty rare that the Will can’t be found...
Skip to content Home About Us Insights Services Contact Accessibility