Business Relief

Very simply, a Business Relief Trust preserves the Inheritance Tax benefits for future generations whilst providing the surviving spouse or partner with full access to the assets during his or her lifetime.

Businesses that have been in existence for more than two years and carry on a trade can receive up to 100% relief from Inheritance Tax. Whilst they are shareholders or partners, the value of those shares benefits from Business Relief, so that shares can be passed down through the generations without Inheritance Tax.   However, if the widow or widower receives cash for the deceased spouse’s share through a shareholder or partnership Agreement, Business Relief is lost. The proceeds of the Agreement will form part of the recipient’s estate and become fully taxable on his or her death.

There are a number of other potential practical threats that are always considered in family succession planning:

  • Assets may finish up in the hands of the survivor’s future spouse or their stepchildren
  • Hostile Creditors, eg Local Authorities for purposes of Long Term Care means testing, divorce,
  • Giving assets or cash to children can leave them open to hostile creditors or claims from former partners

The creation of this Trust means that the surviving shareholders will buy the shares from the Trust rather than direct from the surviving spouse. A Trust can offer protection against all of the above and plus Inheritance Tax.  As the Trust has a potential life span of up to 125 years, future generations of children and grandchildren can do exactly the same thing.  Most importantly, there will be none of the above mentioned potential problems.

For example, the establishment of a Business Relief Trust provides a potential saving of £400,000 of Inheritance Tax payable on a shareholding worth £1 million, and possibly more as the money is passed down the generations.

In summary:

Drawing up a Cross Option Agreement together with a Business Relief Trust means that the shareholders retain control of the business and that the estates of the deceased receive a fair value for those shares.

Learn more about Business Relief Trusts
Without a Will, you are deemed to die Intestate – this means legislation from nearly 100 years ago decides who benefits from your estate. If you are married with children, your spouse may only inherit the first £250,000 of your personal estate absolutely.

Putting in place a Will ensures that you choose who benefits from your estate. You also can appoint Guardians – people who you choose to bring up your children in the event of your premature death.

Please get in touch with any questions you may have

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Inheritance Planning Company Ltd
18 Walsworth Road

T: 01462 61 66 87

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