Peter has a Will. A proper one, reviewed a few years back, everything left equally to his two sons. On paper it looks tidy. In practice one son has run the kitchens and some day-to-day operations across the family’s three restaurants for twelve years. The other works in marketing and has never opened the management accounts.
Peter’s Will treats his 70% shareholding like his house and his golf clubs: an asset, divided fairly. It says nothing about who should run the company, whether the uninterested son actually wants to own half of it, or what his business partner, who owns the other 30%, is meant to do about it.
That is the gap most business owners never notice. A Will can be entirely valid and still leave a business succession unplanned.
Dividing an estate is not the same as a succession plan
Shares in a private company aren’t like a house or a savings account. Where there’s more than one shareholder, it’s common for articles of association or a shareholders’ agreement to restrict who shares can be transferred to, often giving the remaining shareholders first refusal before anything passes to a spouse or child. A Will that ignores those documents can promise something it cannot deliver.
There’s a more human question too: does the intended beneficiary want to run the business or just want its value? A spouse who’s never worked in the company might be exactly right to inherit the family home and entirely wrong to inherit a major shareholding of a complex business.
Tax implications of your succession plan
The tax position has changed as well. From April 2026, Business Relief still gives 100% inheritance tax relief on on qualifying business and agricultural property, but this is now capped at £2.5 million per person. Any unused allowance can be transferred between spouses or civil partners, potentially giving a surviving spouse up to £5 million of qualifying property eligible for 100% relief. Anything above the available allowance gets 50% relief, giving an effective 20% inheritance tax rate. On a business worth several million, that can create a significant tax bill, and someone has to find the cash without necessarily being able to sell the business to raise it.
None of this means starting again. It means checking that the Will, the shareholders’ agreement and everyone’s actual wishes still point the same way, particularly once the business has moved on since the Will was last written.
Who actually steps in if you can’t decide?
Planning for what happens after a business owner loses capacity happens even less, and it can disrupt a business just as badly as a death. A Health and Welfare Lasting Power of Attorney (can cover care and medical decisions. A Property and Financial Affairs LPA can cover money, and that’s the one that matters here because it can give the attorney the power to run the business as well as your personal bank account within whatever limits are written into it, this can be a completely separate person to your Health & Welfare LPA.
The person best placed to manage a family’s finances isn’t automatically the right person to run the company. A spouse might know exactly what the mortgage costs and nothing about the firm’s biggest client. A business partner might understand the company inside out and have no business deciding anything for somebody else’s family. Separate LPAs appointing different attorneys for each are often the sensible answer.
One point to note, an LPA doesn’t hand someone the keys to a limited company. A director’s appointment is personal and unless the articles of association specifically allow it, an attorney can’t simply step into that role and start signing decisions off as though they were a director. Company governance sits alongside the LPA, not beneath it, and assuming otherwise is a common expensive mistake.
Without a registered LPA the fallback is a Court of Protection deputyship, a process that can take months while wages and suppliers still need paying.
What pays for any of this to actually work
A Will and an LPA decide who is in charge. Protection ensures the money exists to make that work and keep things running.
Picture a company owned equally by three people. One dies. Their shares pass to their family who understandably want the value of them, while the other two shareholders want to keep control of the business they still run. Neither side is wrong.
Shareholder protection funds the way through it – life cover for each owner, paired with a legal agreement (usually a cross-option agreement) giving the surviving owners the option to buy, and the family the option to sell. Drafted properly this can also preserve Business Relief because HMRC denies the relief where shares are tied up in a binding obligation to sell rather than an option. Get the wording wrong and a family can lose the tax relief and receive less money than expected.
Relevant Life Plans are a type of protection that let a company pay for a director’s (or employee’s) personal life cover, generally as a deductible business expense with no benefit-in-kind for the individual provided it’s structured correctly. It isn’t automatic and it isn’t the same as protecting the business itself.
That’s what key person cover (another type of protection) does. A business can look financially strong and still depend entirely on one person’s relationships, knowledge or reputation. Losing them through death or serious illness often costs more in lost clients, profit and recruitment than owners expect and it’s a different risk entirely from losing a shareholder.
None of this is complicated once you look at it properly
A will decides what happens to the business when you die. An LPA decides who steps in if you’re still here but unable to decide anything. Protection provides the money to make either of those options work, rather than leaving a family or a set of business partners to sort it out from whatever happens to be available.
Business owners are generally excellent at building something valuable. Fewer have got round to deciding what happens to it if they’re not the one running it. That part isn’t glamorous. It’s the part that decides whether everything built over the years survives the event nobody planned for.
If this article has raised any questions for you, feel free to get in touch!
Written by Fred Barton, Independent Financial Adviser at Flying Colours Advice.
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Any examples used in this article are hypothetical situations for illustrative purposes only. They do not represent actual clients or real people.
Tax treatment depends on individual circumstances, and thresholds, percentage rates and tax legislation may change in future Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.