What happens to your shares if you die

7 min read · 24 September 2026 · Written for business owners

Who this applies to

This sheet is for owners of a private company with one or more other shareholders, where nothing has been written down about what happens to the shares if one of them dies.

What happens without an agreement

The shares form part of the deceased shareholder’s estate and pass under their will, or under the intestacy rules if there is no will.

The family holds shares in a private company. There is no open market for them.
The surviving shareholders are in business with someone they did not choose, who may have a different view about dividends, salaries and the future.
The family may want to sell the shares. The surviving shareholders are the likely buyers, and they need the money to pay for them.
If the company buys the shares back itself, the cash comes out of the business.

A cross-option agreement and cover

A cross-option agreement.

A written agreement giving the surviving shareholders the option to buy and the family the option to sell, with a method for setting the price. It is written as options because a binding contract for sale on death removes business property relief on the shares (Inheritance Tax Act 1984, section 113). From 6 April 2026 business property relief is 100% on the first £2.5 million of qualifying business and agricultural property in an estate and 50% on the value above that, which is an inheritance tax rate of 20% on the excess (Finance Act 2026). A solicitor drafts it.

A way of setting the price.

Either a formula, or a method for valuing the company at the time.

Cover to pay for it.

Policies that pay out on a death, arranged so the money reaches the people who need to do the buying.

The agreement gives the right to buy and to sell, and the cover provides the money to pay for the shares, so a business needs both.

How the cover can be owned

There are three ways to arrange the cover. The tax treatment depends on which is used.

Own life in trust.: Each shareholder insures their own life and writes the benefit in trust for the other shareholders.
Life of another.: Each shareholder insures the others directly.
Company share purchase.: The company holds the cover and buys back the shares itself. A company buying its own shares has to meet conditions in company law and tax law.

Whether the premiums are deductible for the company, whether they are a benefit in kind for you, and how the payout is taxed all depend on the structure.

What to check

Whether there is a shareholders’ agreement, and whether it covers death.
Where the money would come from if you had to buy a co-shareholder’s stake.
Whether their family would want the shares or the money.

Questions and answers

Is an existing shareholders’ agreement enough?

It is enough if it deals with death and there is money to pay for the shares. An agreement can deal with disputes and exits and say nothing about death.

Is it a benefit in kind?

It depends on who owns the policy and who pays. Where the company pays premiums on a policy for a shareholder’s own benefit, it can be. A financial adviser sets it up so that the treatment is known in advance.

What if the shareholdings are unequal?

The amount each policy needs to pay depends on the value of the stake being bought, so the policies are for different amounts. A financial adviser works out the figures.

What about critical illness as well as death?

A cross-option agreement and cover can also be written to apply if a shareholder is too ill to return to work. A financial adviser can look at whether that is relevant.

What to do next

Ask your accountant whether they have seen a shareholders’ agreement for the company, and whether it deals with death.
Putting the agreement and the cover together involves both a solicitor and a regulated financial adviser. Your accountant already knows the shareholding and the value, and can introduce you.

This sheet explains how the rules work. It is not advice, and it does not take your circumstances into account. Your accountant can talk it through with you and can introduce you to a regulated financial adviser.