Farmers who are part of a business which trades as partnerships or sole traders have been urged to plan ahead in case a founding member dies and major assets are frozen.
Tax and trusts expert Gary Priest of mfg Solicitors said death or a loss of mental capacity can trigger rules which freeze assets, making it ‘far more difficult to make arrangements’.
He said: “Sole traders and family businesses in the region are assuming that assets can just pass down through generations, when in fact they get put on ice.”
Instead, Mr Priest said business partners should ensure they have a partnership agreement – along with wills and lasting powers of attorney – with instructions covering what should happen to assets in the event of death.
“The end of a partnership can prove a nasty shock to families already grieving the loss of a loved one,” Mr Priest said.
“Families in business often wrongly assume that things can carry on when a partner or sole trader dies and that other members become entitled to their loved one’s share.
“It is very important for partners to put a written agreement in place now, while everyone involved has full use of their mental faculties.
“Just as with dealing with a will and having to apply for lasting power of attorney, this becomes much more difficult and distressing if it is done when someone has started to lose their capability to decide matters for themselves.”
After a loved one’s death, the partnership is automatically brought to an end unless a written agreement is in place and the right steps have been taken.
“That means bank accounts are frozen, causing cash flow problems, HMRC issues and difficulties paying the bills,” Mr Priest added.
“All the while, suppliers need paying, employees will be entitled to wages and customers will be expecting business as usual.
“A partnership agreement spares relatives the further heartache of trying to deal with the automatic cessation of a partnership.”