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31st May 2012

Are you ready for your biggest deal?

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Cambridge has a number of successful entrepreneurs and business people. This is of course good for the economy and reputation of the city and indeed the country as a whole.

And what of the individuals who make for these successes – the committed founder of a steadfast company, the serial entrepreneur who makes things happen, again and again? What will be their personal legacy? We hope that their businesses will endure, but what about their nearest and dearest? Death for most results in the biggest transfer of assets a person will ever make. Generally it is an individual’s biggest ‘deal’. If the individual’s business was transferring all its assets, no doubt a team of professionals would be called upon to advise on the most effective and tax efficient way to go about it. So how do we approach this very personal deal? In December the Law Commission published a report called Intestacy and Family Provision Claims on Death. In the report it was noted that between half and two thirds of adults in England and Wales have not made a Will. The Law Commission also estimated that in the past three years more than 1,000 claims have been commenced in the courts for reasonable provision from a deceased’s estate. It is clear therefore that many people are not addressing their own succession issues either comprehensively or at all. This can lead to: missed tax and estate planning opportunities; no or inadequate provision for succession of their property on death. Where there is no valid Will to say who will inherit a deceased person’s property on death (or where a valid Will is left but it does not deal with all the person’s property), inheritance is determined by statutory rules (known as the Intestacy rules); reasonable provision not being made for a person’s close family and dependants. If that happens those disappointed relatives and dependants may make a claim for reasonable provision from the deceased person’s estate. This can be both costly and distressing for all concerned. The report which runs to 271 pages examines the current law in relation to intestacy (see key facts below) and provision for family and dependants and recommends some changes so that the law better reflects the needs and expectations of today’s society. It contains some suggestions worthy of consideration such as: there should be better provision for a surviving spouse / civil partner when a person dies intestate (i.e. without a will); there should be some protection for co-habitants who live together as in a marriage or civil partnership but are not spouses or civil partners; even if the deceased was not legally domiciled in the UK (e.g. if they came from another country and had planned to return to that other country one day), it should still be possible for claims to be made against that person’s estate in relation to property in England and Wales; getting rid of some antiquated provisions in the current law which can lead to seemingly arbitrary results in terms of inheritance and impose some needlessly cumbersome technical provisions. There is no timescale for when the Government will respond to the recommendations contained in the report. In the meantime the message from the Law Commission is clear “If this report has one overarching message to the public, it is this: make a Will and keep it under review”. So is this report just another reminder to do or make a Will? For those with business interests and significant assets (or indeed potential) that is just one piece of the jigsaw. Your Will may clearly specify who should benefit after you have gone – but will its provisions work with your partnership arrangements / company articles / shareholder agreements? Have you checked? Do you know? Will your business be able to continue to run smoothly and will your nearest and dearest be able to benefit as you would want? Will your testamentary arrangements and business arrangements work together harmoniously after you have gone or will there be conflict between your partners/other shareholders and your estate? Will your Will (or indeed lack of one) lead to challenges being made against your estate following your death? It is also worth bearing in mind that currently there are some extremely valuable tax exemptions and reliefs which are available in the context of both lifetime transfers and transfers on death. Perhaps you should consider whether it may be appropriate to make use of them in your lifetime whilst they are still available? There is no guarantee that these exemptions and reliefs will endure through future budgets. So the transfer of our assets – in lifetime or on death - is a big deal. Work out what you want and get the strategy right, so that your aims are achieved legally effectively and tax efficiently. For further information, please contact Bernadette O’Reilly, Partner in our Private Client team at or on 01223 461155 .

Bernadette O'Reilly
Bernadette O'Reilly

Cambridge Office Head of Private Client

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