All the shareholders involved in the shareholder protection arrangement should execute wills to ensure their intended beneficiaries receive the proceeds free of any intestacy delays. Those involved should also bear in mind that their shares will typically qualify for 100% Business Property.
Relief for IHT purposes
As explained earlier, shares in an unquoted trading company which have been held for at least two years will qualify for this relief. If this is the case, and the proceeds from the share protection arrangement are left under the terms of the will to the surviving spouselcivil partner, the relief has effectively been wasted since the survivor will then hold cash which is fully subject to IHT in the event of their subsequent death.
Where business property relief is available, the proceeds of the share purchase arrangement may be left to a will trust. In this way, the relief can be ‘crystallised’.
A discretionary trust will allow a range of beneficiaries, including the surviving spouselcivil partner, to obtain benefits from the trust. In the meantime the trust fund will not fall within their estate for IHT purposes. In addition to the potential IHT savings, the trust may keep the funds outside of the survivor’s estate for long term care purposes.
We offer a Bypass Trust for consideration by the individual’s solicitors.This is a discretionary trust where the-shareholder’s children and spouse/civil partner will be included amongst the discretionary beneficiaries. The trustees can then pay income, capital or even make loans to any of the beneficiaries, including the spouse. The trust will be taxed under the relevant property regime outlined earlier.
The Financial Services Authority does not regulate Wills, Trusts or tax advice.