Inheritance tax planning and wealth protection - advice for entrepreneurs
While all our clients have their own individual requirements, there are some common themes which will benefit many business owners when considering succession planning and tax planning. Many of our clients are company shareholders who are understandably concerned about the future of the company should one of the shareholders die. On the one hand, everyone will want to protect their own interest in the business for the sake of their family after their death. On the other, shareholders will want to retain control of the company by ensuring the shares of a deceased shareholder pass to them.
Company shareholdings can qualify for business property relief for inheritance tax purposes – up to 100% of their value – ensuring the most favourable outcome for both the shareholders collectively and their families.
Ensuring full use of this relief is a core part of any succession planning. Putting in place a document that gives options to both the surviving shareholders and the deceased’s estate to buy or sell (according to the circumstances) the deceased’s shares in the company, is one possibility to consider
But how would this purchase be funded? It is possible to take out specialised life assurance policies that are held in trust for the surviving shareholders, providing the latter with the funds to buy the deceased’s shares at their market value. This not only creates a ready market for buying the shares when a shareholder dies, but also provides the purchasing shareholders with the necessary funds.
Look at the whole picture
Richard Moran, senior partner and head of corporate services, comments: “It is really important that business owners consider their business interests alongside their personal and family protection. Getting to know you and developing an understanding of your future plans will allow us to get the most appropriate people involved from the Clarion team, to ensure all planning is integrated.”
Whatever succession planning you are considering, make sure you understand all the options to ensure that while full business property relief is possibly available, the commercial decisions are also right for your own family.
Planning ahead doesn’t solve every problem but it can help provide a framework and an element of security for the business and family.
Effective will structuring
“We are always surprised by the number of business owners who don’t have a will, and that it is not regularly reviewed. As a business grows, it is very important not to overlook the personal position. A shareholder’s will needs to take into account their particular circumstances, in order to maximise business property relief as well,” says Vivienne WIld, Partner in the private client team.
A will that sets out for the shares to be passed into a flexible trust, potentially benefiting the shareholder’s spouse and other members of the family, is one of the many succession planning strategies to consider. The first port of call is always for you to come in and meet with Richard and Viv, so they can listen to you. Once they fully understand you, your family and your business structure, only then can the most appropriate succession planning be put in place for you.
A final word of advice
Give thought to how you would wish for your property and financial affairs to be handled if you ever became incapable of managing your own affairs. Appointing others to make appropriate decisions on your behalf, and in your best interests, by entering into a Lasting Power of Attorney, is a wise precaution.
Can we help you? To arrange a date to come in for a no-obligation chat with Viv Wild and Richard Moran, please call Viv on 0113 222 3228 or email firstname.lastname@example.org.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.