Estate Planning for Business Owners

If you own a business or are using a business structure as part of your estate planning strategy, your estate typically consists of two elements:

• Personal assets
• Business assets

A clear plan is vital to ensure these assets pass according to your wishes without triggering unnecessary tax exposure, financial loss or disputes among family members. Without a tailored estate plan, including a will and a lasting power of attorney, your estate may instead be distributed under default laws or court rulings, which rarely align with personal succession goals.

The importance of a lasting power of attorney (LPA) is often overlooked in estate and succession planning, yet it is critical for business owners. If an owner loses mental capacity, no one – not even a spouse or children – has the automatic legal authority to step in and take on their responsibilities.

In the absence of an LPA, business and financial matters can be frozen for months, or even longer, while the courts appoint a deputy. For a trading business, such delays can cause significant disruption. By appointing trusted individuals through an LPA, you protect business continuity and safeguard your family’s financial security.

For British expatriates in Asia who hold UK-situated business assets or remain UK-domiciled or deemed domiciled, estate planning takes on an added dimension. Business Property Relief (BPR) can play a central role in reducing UK inheritance tax (IHT).

Qualifying business assets may be passed on free of IHT, offering relief far beyond the standard personal allowance of £325,000.

However, BPR must be used carefully and in conjunction with properly structured wills and trusts. For example, in a family where both spouses are involved in the business, leaving all assets to the surviving spouse may seem straightforward, but this transfer would already be exempt from IHT under the spousal exemption.

If the business later ceases trading or is sold during the surviving spouse’s lifetime, the assets may no longer qualify for BPR, resulting in a much higher IHT liability when passed to the next generation.

By contrast, thoughtful planning using BPR within the will and trust framework can preserve the relief and prevent unnecessary tax exposure. 

Planning early is the best way to protect your business legacy, reduce family stress and avoid financial loss.

The estate plan of a business owner looks very different from that of someone with only personal assets, which makes professional advice even more essential.

Off-the-shelf solutions rarely provide the necessary protection or flexibility – a tailored strategy is needed to ensure that your wishes are applied correctly across both personal and business holdings.