Most successful business owners are so wrapped up in running the business that they forget to plan for the transfer of their shares in the business to the next generation. Every business owner should have a succession plan and here are some of the issues you should be considering within your business succession plan.
Business Property Relief
Business property relief is a really valuable planning tool that can reduce any IHT payable on transfers of shares in businesses that qualify. Relief is available at 50% or 100% depending on the type of business transferred. That means that you can transfer those assets either free of inheritance tax or with a 50% reduction in inheritance tax payable. What this actually means is if you have a qualifying business that is say valued at £1m, you could save £400,000 IHT if it qualifies for BHT. It is important that you look at whether your business qualifies for business property relief and if it does, whether it qualifies at 505 or 100%. Only then can you create a succession plan that ensures that you take the most advantage of the relief so that it is not wasted.
Lifetime Gifts
You should always consider making lifetime gifts where you can because you have the opportunity to ensure your gift is effective. However, the issue of lifetime gifting of business assets is very complicated and depends on the type of business and many other things. Nevertheless, you should consider it as part of your plan if it is tax effective.
Wills
If your business qualifies for business property relief, it is crucial that you make the right provisions in your will to ensure that the relief is not lost or wasted.
Trusts
Where your business qualifies for business property relief, using trusts will help to keep and preserve the business property relief especially where your spouse and children are beneficiaries of the trust.
Business Lasting Powers of Attorney
It is important to consider what would happen to your business if you became incapacitated by injury or illness or if you lose mental capacity. Think about who you would want to make decisions on your behalf in those circumstances. Your business could come to a crashing halt if you don’t have any lasting power of attorney in place if that should happen.
Get started
Why don’t you book a FREE 30-minute consultation with Remi to discuss your business and see if you would benefit from a business succession plan. Remi will share lots of tips and information during the consultation, so you have nothing to lose.
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