Where family firms get stuck
Family businesses mix money, work and relationships. A founder may want the daughter who runs the shop floor to inherit the business, and still want her brother, who works elsewhere, to receive something of equal value. Without planning, the shares often get split between them, and one sibling ends up with a stake in a firm they have no part in.
Problems also arise between generations already in the business. Parents and children, or brothers and sisters, may own shares together. If one dies, their spouse could inherit a voice in decisions, which can strain the family as well as the firm.
Using insurance to balance an inheritance
A personal life policy written in trust for the children who are not in the business can give them a cash inheritance, while the shares go to the ones who are. Each child receives something of value, and the business stays in active hands.
Shares in a trading business may qualify for business relief from inheritance tax, which can reduce or remove the tax on them. The other assets in the estate, such as the family home, may not qualify. A life policy in trust can help cover the tax on those, so the business does not have to be sold to pay it. Your accountant or solicitor can explain how the relief applies to you.
Protection between family owners
Where several relatives own shares, the same tools any company uses still apply. Shareholder protection, backed by a cross-option agreement, lets the remaining owners buy a deceased owner's shares from their estate. Key person cover protects the company's profits if the person everyone relies on can no longer work.
Families sometimes feel these steps are unnecessary between people who trust each other. The point is to protect the relationships. A clear agreement agreed in advance takes awkward decisions away from grieving relatives.
- Shareholder protection between family owners
- Key person cover on the founder or lead manager
- Personal life cover in trust to balance inheritances
- Income protection for relatives who rely on their salary
When the founder wants to step back
Succession is about more than death. Many founders hand over gradually, staying on as chair or adviser while a son or daughter takes the lead. During that handover the firm may depend on two people at once, which makes it a good moment to look at key person cover on both of them.
Income protection for the founder matters too if they still draw a salary. A long illness during the transition could leave the family short and the business unsettled. Reviewing the cover each time roles change keeps the plan matched to the people who actually run the firm.
How Hi Tomorrow helps family businesses plan ahead
We start by listening. Who owns what, who works in the firm, and what does the founder want to happen? Once that is clear, we suggest which policies would support the plan, how much cover each person needs and how each should be owned.
We compare the insurers on our panel and set up trusts so the money reaches the right people. We do not write wills or legal agreements, but we work with your solicitor and accountant so everything fits together, and we can help you review it as the next generation takes over.