Heritage Wills: Business Succession Planning

“Our business estate planning is tailor made to suit you and your business”

BUSINESS SUCCESSION

Without the appropriate essential Business Succession strategies and protection, you are leaving your business and your family exposed not only to the taxman but also to potential financial disaster.

With hard work you have built up a sound business to benefit you and your family and naturally you want to ensure that your loved ones are provided for in the event of your death.
So what if the worst happens and you, or a business partner were to die?

Without a valid Business Will, the deceased’s business (or share of it) will be subject to Intestacy rules and who inherits your business assets may not be the person you intended.

This could have a major impact on the running of the business or its value may decrease following the death of such a key person.

Our business estate planning is tailor made to suit you and your business. We take the standard planning options a significant step further. Our planning provides significant protection to the business and dramatically reduce the possible impact of Inheritance Tax. (where applicable).

Furthermore the business and proceeds from any future sale of the business are protected for the bloodline from IHT, remarriage, creditor claims, Nursing Care Fees.

Our Planning leaves each partner or director’s share of their business to individual Family Trusts through appropriate Clauses written into their Wills. Furthermore the appropriate Life Cover will also be assigned to ‘Shareholder Trusts’ so that these proceeds do not impact on the surviving individual estates.

How is this achieved? With the use of Cross Option Planning.

Cross Option Planning

Cross option agreements (also known as the double option or put and call agreement.) as the preferred vehicle for Shareholder Protection Insurance, the cross option agreement provides the surviving shareholders with the option to buy the deceased business owners share of the business.

In addition to the surviving shareholders being able to call their option to buy the shares, the legal representatives of the deceased’s estate also have the option to sell the shares of the deceased business owner to the remaining shareholders.

In either case, whether the remaining business owners want to buy the shares or the legal representatives want to sell, the agreement ensures the option is exercised.

The cross option agreement is set up in this manner to ensure there is no binding sale, i.e. in certain circumstance neither party could exercise their option which means business property relief for inheritance tax purposes can be preserved.

In the process of setting up the appropriate business protection it should also involve setting up a cross option agreement with all the directors / partners in the business, enabling the remaining directors or partners to purchase the share of the business from the deceased’s estate.

This agreement in turn provides the dependents with a willing buyer and with cash, instead of shares or an interest in the business ensuring the right people remain in control of the business.
Once the Cross Option has been executed, the proceeds from any Life Assurance policy replace the share held in the deceased’s Family Trust(s) and so do not form part of the beneficiary’s estate.

These funds are now protected against any of the risks detailed above and the surviving spouse & beneficiaries still have full access to the Trust assets.

The surviving business partner still retains their original share of the business but the deceased’s partner’s share is passed directly into a Shareholder Trust(s) from where the Life assurance proceeds were originally paid. The surviving Director still has the fullest of control on the business as he is a Trustee of the Shareholder Trust(s).

We are committed to our approach and to achieving the outcome you are seeking.