What happens to my practice after my death?
How easy would it be for your practice to be sold if you were to die suddenly? Nicola Draper of Draper Hinks explains the importance of forward planning for accountancy practitioners.
It has surprised us that in the past few weeks we have been approached by a number of sole practitioners who have been worried about what would happen to their practice should they suddenly die.
As a going concern, you have a tangible asset and it is a sellers market (i.e. there are more buyers than sellers).
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for Death & Disability its important to plan ahead - if you can?
Theres a very important distinction to make between Solo Practitioners (who have no staff) and Sole Ptractitions (who have staff)
If you are a solo practitioner be aware that events could destroy your practice in literally the blink of an eye. If only you do the work and contact clients then you should a) Keep a Permanent File showing where all your records are kept and how your file structure works together with any password codes that might be necessary to access information. Keeping a log of Jobs in and out can be very important for anyone taking over to know what the next priorities are. Jobtel (practice Brohers) were lucky enough to sell a practice between the date of death and the funeral thus eliminating any rapid fall off of clients. In your will you can instruct your solicitor to sell the practice immediately and if you tell him to use a broker he will do so for added speed. Don't rely on your alternate maybe he doesn't want your practice but in transferring the jobs to him and stating so to clients and then selling the clients on somewhere else is bound to confuse the clients and add dramatically to the drop off rate.
If you are a sole practitioner the problem should not be so acute. You can state in your will that the senior most person will get a reward/bonus based ona % of the deal to keep him "on side" you could also give him "first offer". If you are in a Ltd co format of course any restraint on staff will continue despite the death of a shareholder.
If you know you are ill and MIGHT die then you can pretty well dictate the process by completing a lasting power of attorney which has to be registered but by that means you can appoint someone to act on your behalf so that if you plainly cannot continue that person cam take day to day decisions for example paying staff wages so that they can conyinue to service clients and begin the process of sale.
The going rate according to Jobtel is around £1.15 per £ of GRF. Those related to the deceased unless involved in the business will usually want a no clawback deal because they do not want to a) wait for a year or sp or b) hassle with a buyer about lost fees. So as a seller you should try to get an all un-front deal for which 75p might be appropriate but thats maybe where you need a skilled broker to negotiate on your behalf.
An Accountancy practice is a business asset and therefor is not subject to IHT.
Julian Hamilton - Director Jobtel practice broker