SPOUSAL BY PASS/BUSINESS TRUSTS

If you own business assets such as a shop or shares in an unlisted company, there probably won’t be IHT when you die as they may be exempt IHT. (See the IR website for what is and is not Relevant Business Property for the purposes of IHT here.)

However, if you leave your shares in a business to your spouse who then sells them to fund retirement, any capital remaining on her death is now potentially subject to IHT. On the other hand if you leave the shares or assets in trust, your spouse or civil partner can take the assets as a loan which has to be re-paid on their death and therefore the value will be sheltered from IHT on their death.

If you have a partnership agreement which provides for your partners or fellow directors to buy the shares or assets from you spouse, they can do so, but as they will be buying the business assets from the trust, the cash is now available to your spouse and family but sheltered from IHT for up to 80 year. Income tax savings can apply as with other trusts.

It’s important to have a partnership agreement or shareholder’s agreement in place as well as relevant wills and trusts in place for all partners.

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