Business owners who carelessly intermingle corporate funds with their own money positively invite confusion – and dispute between their loved ones – after they are gone. In a case on point recently reviewed by Danielle Wane, a property investor’s hopeless disorganisation when it came to paperwork had precisely that malign effect.
When the man died, he bequeathed the controlling interest in his company to the two children of his first marriage. Acting via the company, the children later took action against his widow. They contended that she held the legal title to a number of properties on trust for the company in that they had been purchased with corporate funds. For her part, the widow asserted that she was the sole legal and beneficial owner of all the properties.
Ruling on the matter, the High Court noted that the man had funded the property purchases from two bank accounts. Although the company was referred to in the title of one of those accounts, he used it however he wanted to fund his day-to-day outgoings. The other account was held solely in his name, with no reference to the company, but he again used it freely for both company and personal purposes.
Although the evidence was not all one way, the Court rejected the company’s claim. It was satisfied on the evidence that the contents of both accounts represented the man’s personal funds. A claim in respect of £130,000 that the widow withdrew from the man’s other accounts shortly before his death was also dismissed.
The Court noted that its ruling was bound to come as a great disappointment to the children, who might feel that it was not the outcome their father would have wished for. If that were the case, however, it was a consequence of his hopeless failure, over many years, to organise and document his business finances and transactions with greater rigour.
We Asked Senior Associate Solicitor Danielle Wane For Her Expert Insight –
“This case is an example of how important it is to get your affairs in order and not to presume the law is always fair. I had a similar case, whereby the deceased had put his carer on his account, so she could access his funds as and when he needed them. The purpose for this was only ever for administrative assistance. When he passed she was considered a joint account holder and inherited the money in the account. Which was never the deceased’s intention. Thankfully, we challenged this and managed to come to an agreement. However, my case showed the importance of Lasting Powers of Attorney and furthermore the importance of seeking independent legal advice and understanding what happens to assets held in joint names. This case shows the importance of seeking independent legal advice and appointing trustees to hold property in trust for the benefit of intended beneficiaries”