Taking care of your business
Succession planning can be a headache for family businesses.
It’s a crucial subject, requiring careful thought and planning, particularly when some family members work in the business and some don’t.
Often it can get filed in the “too difficult to think about now” box and decisions are put off.
Trusts can be used to provide an effective solution to this.
Simply put, a trust is a device which separates the legal control of an asset from the beneficial ownership.
The separation of ownership and control can be particularly useful in the context of succession planning.
A business owner may wish to give away some shares as part of an inheritance tax planning exercise, but might not feel ready to give up full control.
They could place some shares in a trust for the benefit of the children and future generations and appoint themselves as trustee.
The shares would have been given away for tax planning purposes, but control can be maintained via the role as trustee.
This is a good way of allowing non-working family members to share in some of the benefit from the family company without them having a direct shareholding and being able to have a say in its running, as well as allowing the tax-efficient spreading of income across the family.
At the moment, the tax reliefs attached to trading company shares mean that such planning can usually be undertaken without a tax charge.
Trusts are just one tool that can be used to unlock complex succession problems. If you’d like to talk about unlocking your succession, please get in touch.