What Happens to a Business Asset When the Owner Dies Without a Will?

When someone dies without a Will in place, they are said to have died intestate. In this situation, the rules of intestacy take effect, dictating how their estate should pass or be divided.

With over half of UK adults not having a Will in place according to the Money & Pensions Service, this is a common occurrence.

The basics of intestacy have been covered in our comprehensive article on what happens when someone dies without a will.

This article specifically considers what arises when that person’s estate includes business assets.

The Impact on Different Business Structures

Estates can become further complicated if the deceased’s estate includes business assets which form part of their estate at death and pass in accordance with intestacy rules.

They are not automatically inherited by a spouse or civil partner as they are not joint assets. Beneficiaries may inherit business assets or shares in a business that they have no desire to be involved in.

Additionally, future trading and other people with a business interest can be severely impacted. Some of the practical issues include:

Sole Traders

For sole trader businesses, banks accounts in the deceased’s name are frozen and some contracts may also be unenforceable until Probate is granted.

The assets, such as equipment, stock and goodwill, form part of the estate. They are then passed on according to intestacy rules. This may therefore not be ideal for business continuity, as the business’ assets will be held across all relevant beneficiaries, rather than what is best for the business.

Partnerships

A partnership automatically dissolves on the death of a partner unless there is an agreement in place to stipulate otherwise (Partnership Agreement). This can be very problematic for the surviving partner and particularly any business borrowings. The deceased’s partner’s share also passes to the estate.

Without prior planning, the surviving partner may be required to buy out the deceased’s share from the estate.

Limited Company

For limited company directors or shareholders, the shares become part of the estate.

If the deceased was a bank signatory, the bank may suspend access to bank accounts until Probate is granted, affecting payments to creditors and staff.

A surviving spouse or family member may inherit shares and become immediately responsible for certain aspects of managing the company.

Taxation Issues

Generally, Business Relief (formerly ‘Business Property Relief’ or ‘BPR’) is an inheritance tax relief which can be claimed on an estate where there are qualifying business assets. This is in addition to other tax reliefs (like the Nil Rate Band and Residence Nil Rate Band).

The reduction in value may be 100% or 50% depending on the assets and the nature of the business.

From April 2026, should the deceased have qualifying business assets, Business Relief available to be claimed will be capped at £1,000,000. This is also not transferable between spouses or civil partners.

Should the proposals take effect:

• If a business owner dies after April 2026, their estate could face a higher IHT bill.
• If the business is sold at a later date by a surviving spouse, tax liabilities may also increase upon the death of the surviving spouse.

Proper estate planning, including an up to date Will, is therefore essential to protect the business and affected family members.

How a Will Can Protect Your Business

Planning for the death of a business owner may include making a Will, partnership agreement/shareholder agreement and articles of association. It’s beneficial to plan for a range of scenarios when considering the future of a business.

A well-drafted Will can allow you to:

• Choose trusted Executors and Trustees.
• Stipulate who you want to benefit from your estate, including your business or shares in it.
• Reduce disputes and create less ambiguity.
• Provide continuity for business and security for those involved in the business.
• Offer tax efficiency and access to Business Relief.

Including a Business Property Trust (BPT)

It’s possible for a Will to include a Trust which can be beneficial for several reasons. More specifically, if a Business Property Trust (‘BPT’) is included, it comes into effect on death and deals with business assets owned by the deceased that would pass into the BPT.

This is a discretionary trust designed to hold assets that qualify for Business Relief. Its benefits include:

• Maintaining control over the business through trusted Trustees.
• Preserving the Business Relief cap of £1 million per shareholder.
• Allowing the company to continue to trade, and the survivor to continue to benefit from dividends.
• Protecting the business from being sold or mismanaged by unintended beneficiaries.

Steps to Protecting Your Business and Legacy

Without a will in place, the future of your business and how your family is left to deal with your business, is uncertain.

Steps to protect your business in the case of death include:

1. Creating a valid Will addressing your business assets.
2. Reviewing your partnership or shareholder agreements.
3. Seeking professional advice on tax efficiency from an FCA-regulated advisor.

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