Wills for business owners needn’t be taxing
If you own shares in a trading company and have held those shares for more than two years, there’s a specific inheritance tax relief available upon your death known as Business Property Relief (BPR).
BPR means no inheritance tax will be payable in respect of your shares in the event of your death. It can also be applied to premises owned by the company or a majority shareholder.
However, to secure BPR it’s crucial you seek proper advice. I work closely with our commercial team to ensure company documents reflect the wishes of the respective shareholders on death.
For example, would you want your spouse or partner to inherit your shares? Or would you want your shares to remain in the company and your partner receive the sale proceeds of the shares? If so, will the company have the funds to buy your shares from your estate?
Furthermore, should your spouse inherit the sale proceeds rather than the shares, BPR will not be available upon their death and inheritance tax planning should be considered.
BPR means no inheritance tax will be payable in respect of your shares.
If a trust is included in your will and the shares directed into trust, the trustees would have the power to sell the shares to the company.
The sale proceeds would pass into the trust and would therefore be ring-fenced from your spouse’s estate for inheritance tax purposes upon their death. As inheritance tax is paid at a rate of 40% this could lead to a substantial tax saving.