How succession planning could benefit your client’s family business

Many clients who own a family business put their heart and soul into building their company, but few put as much energy into preparing for what happens after they step back.

Without a clear succession plan in place, even the most successful family businesses can face uncertainty when it comes to passing ownership on to the next generation.

Alongside potentially complex emotional issues to navigate, there are also multiple financial and legal considerations. If clients don’t have a plan in place, they risk missing out on tax mitigation opportunities and strategic decisions that can help support them, their family, and the future of the business.

That’s why early, joined-up planning with a team of financial planners and solicitors is key to ensuring the continued success of the business and the parties involved.

Read on to find out how succession planning could benefit your clients’ family businesses and what financial planners and solicitors can do to help.

How financial planners can support family business succession

A financial planner can play a key role in aligning a client’s family business succession plan with both the new and former owners’ financial futures, as well as the continued success of the business.

Instead of considering the various parties as separate entities, they can help ensure that the transfer is to everyone’s benefit, supporting the family and the business as a unit rather than individually.

Here are some of the ways we can assist.

Modelling different exit strategies

A financial planner can use cashflow modelling to show clients projections of how different exit strategies could affect their long-term wealth.

For example, if the client were to maintain a stake in the business, the model could illustrate how that income might support their retirement plans. Or, if they wanted to start a new business, a financial planner could help them understand how the existing business could support their new venture.

The client can then proceed with the transfer with a good understanding of the long-term implications, and can ensure their decision supports both their personal financial security and the future of the business.

Retirement planning

A financial planner can help the former business owner understand what they’ll need to maintain their lifestyle once they exit the business.

If they’re passing it on within the family, there’s unlikely to be a sale. So, they’ll need to work out how to extract income in other ways, whether through dividends, drawing on personal investments and pensions, or other means, such as rental income.

A financial planner can help ensure the owner’s financial needs are met without putting too much pressure on the next generation running the business.

Tax planning

Depending on how the transfer is structured, certain taxes may apply. For instance, if the former owner dies within two years of passing on the business, it may not qualify for Business Relief (BR), which could potentially mean Inheritance Tax (IHT) is due.

A financial planner can help assess the most tax-efficient way to manage the transfer. They can also advise on the timing of a sale to help maximise reliefs and ensure it aligns with the owner’s wider financial goals.

How solicitors can support family business succession

Succession planning also has a significant legal dimension, and alongside financial planners, solicitors can support clients in the following ways.

Drafting key documents

Solicitors can draft the legal documentation essential for a smooth and compliant transfer of the business. This may include updating shareholder or partnership agreements, as well as drawing up contracts that clearly outline roles, responsibilities, and terms of the transfer.

It may also be necessary to update wills to reflect the new ownership and ensure the business is passed on as intended. Some clients may also wish to create a business Lasting Power of Attorney (LPA) to appoint someone they trust to make decisions if they become unable to do so, which can help ensure continuity and protection for the business.

Mitigating the risk of disputes and mediating where necessary

Solicitors can help mitigate the risk of disputes by establishing clear, legally binding terms that reduce the likelihood of disagreements among family members or business partners.

This might include formalising succession agreements, ownership structures, and decision-making processes to avoid ambiguity.

If conflict does arise, solicitors can also help mediate and offer legal guidance to resolve issues efficiently. This can help minimise disruption to the business and preserve family relationships.

Ensuring compliance

Solicitors can help ensure the business transfer and any associated tax mitigation strategies are legally compliant.

They can work alongside financial planners to make sure all legal documentation supports the agreed strategy, helping to avoid costly errors or unexpected liabilities down the line.

The value of a collaborative approach

By getting the right advice early and involving both a financial planner and a solicitor, business owners can protect their legacy, support their family’s future, and exit on their own terms. It’s one of the most valuable steps they can take to bring peace of mind to what’s often a complex transition.

To find out more about how our sectors can work together for the mutual benefit of our clients, get in touch.

Email info@fbwealth.co.uk or call us on 0333 1122211.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, Lasting Powers of Attorney, or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.