Protecting your Business & Assets
How can business trusts help You?
Do you have a business? You may be entitled to reliefs and exemptions to minimise your Inheritance Tax! The IHT legislation is still very ‘business-friendly’ and proper attention and planning can ensure significant savings are achieved. The value of your business assets in conjunction with all other assets may mean that you will be IHT liable (this can be prevented with Business Property Relief!). The requirements in all cases is that the business assets MUST be owned for 2 years prior to the transfer (i.e. on your death).
You may qualify for 100% relief on the value of:
- An unincorporated trading business;
- An interest in a partnership;
- Unquoted shares in a trading company (including AIM shares);
- Securities in an unquoted company controlled by the owner.
You may qualify for a 50% relief on the value of:
- Shares or securities in a quoted company controlled by the owner; or
- Land, buildings, plant or machinery which is used by a company controlled by the owner or by partnership in which the owner is a partner.
If your business assets qualify you must carefully consider who is going to inherit. You may wish to leave your business interest to your children or spouse but:
- You are concerned about their ability to deal with the asset? or
- Wish to undertake some IHT planning for their estates?
The solution would be to use this Trust within your Will; through such planning the relief can be maximised.
Leaving any qualifying interest in a business straight to your spouse can lead to 40% IHT on their death if they decide to sell it as the cash proceeds will form part of their estate. Wasting the relief! A better route would be to leave your assets which qualify for BPR to a discretionary Will trust: if the interest is then subsequently sold, the cash proceeds of sale would be kept outside of the estate of the surviving spouse as they belong to the trust and will not form part of their estate and won’t be subject to IHT on the spouses’ death. Instead your spouse and children or family members are beneficiaries of the trust and can have access to the cash proceeds. The tax saving would be 40%.
Cedar Wills & Trusts have provided all services required with regards to our inheritance tax planning, wills and have supported our wider family with all of this plus funeral plans – Andrew F
Explore the benefits of having a Business Property Trust in place below....
Appointed Trustees can manage the business interest where intended beneficiaries are not ready to take over the management of the business.
As the business assets are placed into trust, should the assets be subsequently sold, the cash proceeds will not form part of anyone’s estate at all, and shall instead be subject to the low IHT rates applicable to trusts.
Allows you to pass business interests onto your children, whilst at the same time making financial provision for your spouse.
A way of placing valuable assets outside your own taxable estate and down to the next generation with little or no tax.
Your spouse shall be able to receive an income from the business interest during her life.
Where possible, your Will should be structured in such a way so that assets qualifying for BPR are left to non-exempt beneficiaries (i.e. taxable beneficiaries). Otherwise, the relief could be wasted.