Few entrepreneurs sufficiently anticipate the consequences of their death. Often no provision is made for the management, ownership, control, the necessary steps, the wishes of the entrepreneur and possible financial consequences of the death of the entrepreneur. Important questions are:
- who will be in charge of your company?
- what should happen to your company after your death?
- who will ultimately be the owner/shareholder?
- which advisors should be involved in the transfer?
- Is the business succession scheme applicable and/or optimal?
- make your own wishes clear within your family and with your advisors, are these people aware and have they been formally appointed?
- ensure a correct and optimal legal structure
- Are there representatives who can start working immediately?
Introduction of entrepreneur’s will
Changes within the family, the company, tax legislation or the wishes of an entrepreneur can influence the will of a director, major shareholder (DGA) and/or entrepreneur. In a will, the DGA/entrepreneur determines how his assets (private and business) should be handled after his death. A correct and up-to-date will will give the surviving relatives (and also the stakeholders within the company, such as the bank and employees) peace and security.
When an entrepreneur dies, the tax authorities will levy tax on the value of the company (box 1 or box 2). Fortunately, there is a business succession scheme that can limit taxation. In addition to income tax, inheritance tax must also be paid. As an entrepreneur, it is important to calculate how much tax must be paid during your lifetime and/or whether this money is available.
Who are the heirs of the entrepreneur or DGA?
By law, your family members are your heirs.
- If you are married and have children, your partner and your children are your heirs and the surviving spouse will be in charge.
- If you live together without being married, your children will inherit, and your partner will be “watching”.
- If you are not married, do not live together and there are no children, your parents, brothers and sisters are your heirs.
If you, as an entrepreneur or DGA, would like to do this differently, for example to make optimal use of the business succession scheme, you must draw up a will.
Who will arrange the settlement and distribution of the entrepreneur’s or DGA’s estate?
The question is who will drive to your company immediately after your death to take care of the financial and legal matters. Your private assets must also be divided, sold or transferred. If you do not arrange anything else, the heirs will have to arrange this in consultation, which can cause a lot of hassle, hassle and delays. It is often best that you appoint one or three people who will act as executor and are therefore legally authorized to settle your will. These people can also be your heirs, but this is not necessary.
What happens to the business of the entrepreneur or DGA after death?
When an entrepreneur or DGA dies, many matters often have to be arranged immediately. A problem or vacuum may arise within the management (board) of the company. It is wise to give someone power of attorney who can make decisions on your behalf after your death.
It must also be clear what needs to be arranged and who needs to do what. Most entrepreneurs do not think enough about this, which can cause many problems and heirs do not know what needs to be done and what the entrepreneur’s wishes are. Should the company be sold? Who will manage the company? etc. It is wise to carefully record what the entrepreneur’s wishes are upon his death. The central question must be how the continuity of the company can best be guaranteed. Questions that need to be answered are:
- How to guarantee continuity?
- Are there children who want and can take over the company? How does this work out tax-wise upon death?
- How much tax is due upon your death and can it be paid?
- Who will manage the company immediately after your death and what decisions can he/she make?
- Who will take care of the income tax and inheritance tax returns?
- What is the role of your notary, accountant and/or tax specialist?
- Settlement administrator: the executor is the administrator of the shares in your company. However, this person is not the director of the BV. In your will you could appoint a resolution administrator who could then manage the company and liaise with your bank and accountant.
Living will for the entrepreneur or DGA
If you are no longer able to make independent (responsible) decisions temporarily or long-term, it is wise to draw up a so-called living will. For example, if you are in hospital for a long time or become ill (dementia), someone else can make the necessary decisions for you. You can include the following in a living will:
- Who is your confidant: choose a confidant (or organization) who can and may make decisions on your behalf. You can also include several (different) confidants, for example someone who will manage your company, someone who can decide on your private assets and someone who can and may decide on your medical condition. Do consult with this confidant – during your lifetime – so that he or she is not faced with any surprises and also knows what your wishes are.
- Rights of a confidant: in the will you can include what you want the confidant to do in your private situation and/or your company and what he/she may and may not decide on. You could also determine that external expert advice should be obtained first.
- Who is allowed to view your living will: you can determine who can view your living will. Sometimes it is wise to provide a copy to your accountant, tax specialist, notary, bank or GP (if you would appoint them in your living will).
General points of interest in the will of an entrepreneur or DGA
There are various things that you as an entrepreneur or DGA need to think about. This section contains the most important parts
- Executor (see above): appoint someone (or an organization or several people) who can manage, sell or handle your private and business assets.
- Divorce of heirs: suppose an heir gets divorced in the future, can the ex-spouse (cold side) also receive part of your inheritance (indirectly)? If you do not want this, you must include this in your will via a so-called exclusion clause.
- Tax-proof: consult with an expert estate planner or notary about the best route from a tax perspective.
Points of interest regarding BV or company in will of entrepreneur and DGA
There are specific points of attention for entrepreneurs in the will, the most important of which are:
- What should happen to the company after your death?
- Who will (temporarily) manage the company?
- Is there sufficient money available to pay income tax and inheritance tax?
- Are there agents who can act and make payments directly on your behalf?
- Does the intended business successor have to reimburse the value of the company or is this provided free of charge? Is a legacy desirable so that it is clear who the successor is? It is often wise to also appoint the successor as executor so that he/she is not dependent on the other heirs for the delivery of the shares.
Questions about wills for entrepreneurs
If you have any questions or comments, please contact the tax specialists below.