UK Business Owners and Entrepreneurs
Chris (not the real name) had sold a business in a trade sale to a National firm. Believing that the business had been guided to its maximum potential and as family had no interest in taking it on, perhaps to the next level, a sale was considered and agreed to be the best option.
We had the pleasure of meeting with Chris during the process and as in many cases, the transaction consumed almost every moment, resulting in being unable to see and plan much further than getting the deal over the line. Indeed, it was often said that it might be better not to plan too much in case the deal was ‘jinxed’ altogether.
This is not an uncommon emotion at such a complex and stressful time in any business journey and we were happy to make some sensible suggestions that helped certain matters through that specific period.
Most importantly, the suggestion was made to transfer some shares to children via a Trust. Chris understood that the plan to pass wealth to the children was going to be much worse post sale, in terms of Inheritance Tax, so this transition ran in conjunction with both lawyer and accountant was a simple and yet very effective piece of planning that would have been lost once the transaction had completed.
Immediately after the transaction, Chris felt that there were two main worries. Firstly, there was a concern about leaving such a large amount in a single bank account. With the financial crisis still in the memory it would be better not to be worrying about the financial security of a bank, but also the well reported increase in fraud attempts, meant that it might be a target.
Secondly, there was concern about regular income – salary and dividends had now stopped. This, it was feared, could lead to constant dipping into cash and quickly eroding it. Chris could not visualise what was needed and indeed, how long it would last.
We were able to help Chris in segregating the cash to provide reassurance about institutional risk as well as compartmentalise funds, whilst generating regular liquidity to help normalise income levels and therefore budgeting.
After a short time – including a nice holiday to rest and let the dust settle – future plans were being formed.
Life was good before the transaction. Children were at good schools, they lived in a nice house and socialised well with great friends. Therefore, the priority was to stabilise what they already had – provide certainty that their change in wealth would not affect the motivation of their children and would not alienate them from friends.
We were able to help the family rationalise and organise their liquidity, ensuring that they had consistent ‘income’, whilst having suitable access to capital as and when it was needed.
It was clear however that the family was realistically never likely to spend all their wealth and so thoughts quickly turned to making sure that the wealth was invested to at the very least keep pace with the effects of inflation. Real Estate, traditional and alternative investments – the latter been classic cars in this instance – all were considered and we advised the family throughout this process, whilst ensuring that not only the assets were well balanced to avoid concentration risk, but also ensuring that assets were dealt and held most efficiently – Costs and Tax often have a detrimental effect on returns and so working alongside accountants and lawyers, we were able to structure their wealth in a way that ensured both efficiency and flexibility.
Finally, we helped engage the growing family by establishing a charitable trust, which not only brought them all together to do great things for worthy causes, but also meant that financial matters could be discussed in a less direct and emotive environment.