Tim Whitney, family lawyer at Mills & Reeve looks at succession planning and keeping it in the family
Oxfordshire is a business and technology hub, experiencing the growth of both long-established family businesses and the founding of entrepreneurial technology and life science businesses.
As these businesses grow, the minds of founders and owners will naturally turn to how they can best protect and pass on these assets to the next generation of their families, with necessary consideration given to succession planning for the running of the business itself and also ensuring ownership of the business and its assets are protected. This is especially important around a money-making event such as a sale or merger of the business.
Having worked hard to establish the business, founders will want to see their children and grandchildren enjoy the wealth it generates. However, it is crucial that this is done with the benefit of professional advice so that the succession is structured in as tax-efficient and commercial way as possible, and also to ensure that assets are protected against any unforeseen events such as a marriage or relationship breakdown.
Our private wealth team has extensive experience advising business owners on wealth protection matters to ensure that any future family breakdown does not negatively affect the assets or the day to-day management of the business.
There are several ways we advise that such assets can be protected.
Often the most tax efficient way to pass on assets is to gift funds absolutely to a member of the family. However, this also runs the most risk from a wealth protection perspective. The Family Courts have very wide discretion to re-distribute assets on divorce, and any gift to the next generation could therefore form part of the assets available to that separating couple and be subject to sharing.
If passing on business assets, or securing money derived from a business for the next generation, ensure that early and open discussions are had with the recipients about pre-marital agreements if the recipient intends to marry, or co-habitation agreements if the couple plan to live together. These could allow funds provided by the business owner to remain separate property throughout the marriage or period of cohabitation and would therefore be better protected in the event of a relationship breakdown.
Depending on the circumstances, it may be better to loan funds to members of the family rather than giving absolutely, as it is less likely that loaned monies will form part of the matrimonial pot on any future divorce. If this is considered, ensure that the loans are properly documented and that all parties adhere to the terms of the transactions.
Our top five tips for Separating well. Together
- Take advice early
- Remember generational protection as well as tax
- Have open discussions within the family and be clear about expectations
- Consider properly documented loans alongside gifts
- Ensure assets are protected by a pre-marital or co-habitation agreement
Scan the QR code and connect with Tim Whitney, Family lawyer and mediator
www.mills-reeve.com
Mills & Reeve’s UK presence: Oxford | Cambridge | London | Birmingham | Leeds | Manchester | Norwich
