Do you own a family business or have shares in a small company?
Have you considered the implications of Inheritance Tax should one of the owners of the business die?
The following article by Chris Ridgway of APS Legal & Associates discusses how a Business Trust can increase the value of the assets that pass down the line.
Inheritance Tax is not charged on any interest in any trading business that has been owned for at least two years – this extends to sole trades; partnerships; and shares in unquoted trading companies.
Most businesses (Excluding those that are purely investment or Property Companies), receive 100% Inheritance Tax (IHT) relief when they pass to another member of the family. So a self-employed hairdresser who leaves his/her salon and business to his/her spouse should not be worried about IHT on the business. However on the death of the remaining spouse, the total value of his/her house and savings may mean, that inheritance tax is now payable.
Using a Business Trust can increase the value of the assets that pass down the line.
The Business Trust: A Summary.
The business owner arranges for his/her Will to be amended, so as to leave the share of the business into a trust that has been written into the Will.
On the death of the business owner, the legal ownership of the share of the business is transferred into the business trust under the terms of the Will, which includes whom is to be the main beneficiary or beneficiaries of the trust.
The business assets may be sold (perhaps in accordance with a share purchase agreement), in which case the proceeds of the sale will pass to the business trust under the terms of the Will. (The main beneficiary, a spouse for instance, will still have access to the assets held in trust, during their lifetime).
The remainder of the estate passes to the surviving spouse directly. Any gifts from the deceased spouse to the surviving spouse will be exempt from inheritance tax.
When the surviving spouse dies the value of the assets in the business trust do not form part of his/her estate
For more information and/or to discuss your options on Trusts, Inheritance Tax Plans and Will Writing Services give Chris Ridgway a call on 01554 719 096
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