Wills & Business Owners | Davis Blank Furniss Solicitors

Wills & Business Owners

Do you have an interest in a business?  If so, it is important that you ensure your Will makes full use of the exemptions that are available in order to reduce your family’s inheritance tax (IHT) liability.

Each individual has an IHT threshold of £325,000 and anything over this is taxed at 40%. If you leave assets to your spouse or civil partner then there is an exemption on those assets and there is no IHT liability.

If you are an owner of a business, Business Property Relief (BPR) is a relief from IHT of either 100% or 50% for “relevant business property”. However, if you leave business assets to your husband, wife or civil partner then it will automatically be exempt from IHT and so BPR will be wasted.

BPR is a great way to benefit people who are not exempt from IHT, such as your children or grandchildren. You could leave a specific gift of business assets to your children, which would be free from IHT using BPR, and you could leave everything else to your husband, wife or civil partner, which would also be free from IHT. This is tax efficient for you and ultimately for the surviving partner’s estate.

You may want more flexibility about who your business assets pass to. For example, you may want your partner to receive income from a business or you may want to provide for succession of a business to your children at a certain age.

A discretionary trust in your Will is flexible, it protects your business assets and maximises BPR. A discretionary trust does not have a specific beneficiary with an automatic right to income or capital. Instead, your trustees have the power to advance money or business assets to any of your named beneficiaries as they see fit. Your named beneficiaries can include your partner, children, grandchildren as well as other family members or even business associates. In addition, you can leave a separate Letter of Wishes for your trustees to provide guidance about dealing with the business assets.

More than anything it is important that you seek advice about the relief, when it applies and what conditions will apply to you.  If you would like to discuss this in more detail then please do not hesitate to contact myself or Laura on 0161 832 3304.

Karen Witter

Partner, Private Client team


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