Business Succession Planning series – 3. Business Property Relief

Business Property Relief as part of an estate planning strategy In the third of our articles about Business Succession Planning we talk about Business Property Relief (BPR) and how this tax efficient mechanism forms an important part of supporting your clients future business needs. BPR is a form of inheritance tax relief, and it can often be a valuable business succession planning tool for reducing any IHT that is payable on transfers of relevant business property in an individual’s lifetime or when they die. If suitable then BPR can reduce the taxable value of the transfer by 50% or 100%, depending on the type of property transferred. Why conduct a BPR check with your clients? For those clients that own their own business, then conducting a BPR check with them can ensure they have the right arrangements in place to plan for the future in order to qualify for 100% BPR on the transfer of a business interest in life or death. Supporting your client with their BPR needs will help ensure they can retain long-term control over their business to help ensure it is transferred to the right person in a tax efficient manner. A Business Trust can be incorporated in to a clients’ Will to help ensure the available BPR on death is used in the way desired. BPR Considerations The key considerations for BPR is the business type – essentially of the business is a trading (the business must be ‘wholly or mainly’ trading to qualify) or an investment business. An investment business, so those who deal in securities stocks or shares, land, buildings or make or hold investments, are not eligible for BPR. Neither are those businesses that are listed on the main stock exchange. On the other hand, BPR is a consideration for: • Sole traders • Partners of members • shareholders So the nature and type of business is the first consideration, the ownership period is another. A business will qualify for BPR when the individual or trust has owned it for at least two years, although there could be some scenarios whereby BPR could be available before then: • If a couple own the business and a spouse dies and transfers ownership, then the period of that ownership may be combined • If there has been two consecutive transfers, one of which on death and the first transfer was eligible for BPR • If the business property has been sold and then replaced within three years, then BPR may be possible if both properties (assets) were owned for two of the five years. Also to note, HMRC may deny BPR if a binding contract for sale is in place, which could be specified within the partnership or shareholders’ agreement should the individual die. The use of cross-options, which give each interested party an option to buy or sell the asset, may be used instead. Tax rules could obviously change at any point and there cannot be any guarantee that companies that qualify today will remain BPR qualifying in the future. https://www.gov.uk/business-relief-inheritance-tax If you or your clients have any questions regarding their business succession and property relief then just get in touch – call 01522 500823.

Business Succession Planning series – 2

        Reasons for having a Business Lasting Power of Attorney. Helping a client implement a Business Lasting Power of Attorney (LPA) specific to their business could be one of the most important and helpful things you could possibly do for them. Many people are so caught up in their business activity and driving growth that the future long-term perspective is sometime lost a little, and yet this lack of focus could jeopardise years of hard work. A Business LPA, quite simply, will allow your client(s) as a business owner/partner to appoint someone to make key business decisions if they are not able to in circumstances such as; If they were abroad on holiday or on business They were to have an accident They developed a medical condition that incapacitated you   A Business LPA (also known as a commercial LPA) quite simply will allow your client(s) as a business owner/partner to appoint someone to make key business decisions if they are unavailable or lack mental capacity which will put the business at risk. Creating a Business LPA. A key reason for implementing a Business LPA is to help ensure a business can continue to operate smoothly when need be, but it’s essential that the right Attorney is selected. When selecting an Attorney there are a number of considerations that your clients should bear in mind: Can the chosen attorney be trusted to make the right decisions for the business? Do they have a long-standing relationship with your client? Or does your client wish to choose an independent professional such as a solicitor? If a client has a personal LPA, they do not have to select the same attorney for their business LPA. In fact this maybe best as there could be a conflict of interest Do they have the professional knowledge, skills and capacity to step in and make necessary decisions? Are they legally eligible? Would their appointment as Attorney cause any possible conflict, with family, for example? Is the attorney clear on what their role and decision making covers – powers can be limited. Are other business partners aware of the LPA being in place?   The type of business. The type of business your client has may impact on the terms of a Business LPA and the following should be considered: Sole Traders As an individual based business having an LPA is advisable as the risk exposure is potentially huge if your client loses capacity as there will be no one to pick things up and progress the business in a legal capacity. Partners (general and limited partnerships) Your client will need to consider their partnership agreement they have in place, as this may already have provisions in place regarding lack of mental capacity. It’s recommended all partners implement a Business LPA to avoid future conflict and possible claims. There may also be various legal implications for consideration as part of the partnership. Company Directors A Business LPA may be particularly useful in this instance in order to protect against future discrimination and to safeguard the individuals’ business interests. But there may be additional terms of agreement to take into consideration, such as the fact that the Attorney may not be able to fully take over the Director role without Board approval. If you’re client is a director of a company, check the company’s articles of association as this may make some provision in the event of a director losing capacity for instance. However, if your client is a sole director of a private company the articles of association, if in existence are unlikely to make adequate provision and in such circumstances a business LPA will be beneficial.   A Business LPA in many circumstances can provide long-term protection for the interests of the individual but also for the continuance of the business. No LPA will only mean delays in decisions, possible limited access to funds and potential negative or discriminatory behaviours by other interested parties, all putting the future of a business at risk.   To have the opportunity to speak with your clients about implementing a LPA, just get in touch with BTWC and we can help ensure you have all the information, documentation and guidance you need to help your clients, just call us on 01522 500823.

Business Succession Planning – series 1

        How many of your clients own their own business? Do they have succession planning in place? Approximately 4.7million business in the UK are family owned, and 100,000 family SME’s will undergo a family transfer of ownership between generations every year (Institute for Family Business). This figure alone immediately points to the need to ensure business succession planning is in plan for a successful transfer within a family. But how many of your clients have their own business and have yet to fully get their succession planning in place? The cost to them and their family could be huge, but you have the opportunity to help them get everything in place for future security. Families in business often feel a responsibility to pass on a credible and successful business to family members, but the ways and how’s of doing this can be overlooked or misinterpreted and may fall short of ensuring full protection for the future.   The need… As a key contributor to the UK’s economy (they generate over a quarter of the UK’s GDP), family businesses are integral to supporting future growth and employment in the UK. Inevitably, at some stage a business owner will decide (through a number of reasons) to retire from their business, and having a succession (or exit) plan in place will help for a smooth transition, which will be beneficial for those involved as well as for the business and its customers. 70% of family business (PWC Family Business Survey 2017) already have family members as part of the business, and yet only 13% of these business have succession planning in place. The gap is visible and the need is vital for business succession planning.   What is business succession planning? Succession planning can start at any time, but the earlier the better. Unknown and unexpected events can occur at any point and a robust plan can eliminate turmoil and disagreements at such times. Without a plan then a business can be at risk. Legal obligations, the value of a business and the smooth running of the business will all be affected factors. Having a succession plan in place will ensure that the business is transferred to the chosen representatives, it will outline all legal elements and can also ensure any tax implications are planned for.   A Will may be the first step… By making a Will, and keeping it up to date, then a client can clearly outline their intentions for their business and who it may pass to. A Will can outline what will happen to a business and its assets. Clear instructions can be given on business ownership, type of succession and transfer of assets, helping ensure the business, or part of it, stays within the family for future generations. A Will should take into consideration other aspects, for example, if a partnership is in place with ownership of a property then there may be a ‘joint tenancy’ as part of the partnership which will ensure the property is transferred to the partner irrespective of other elements of the Will. As in any circumstance, if no Will is in place then assets may pass according to the rules of intestacy, and the business may not be transferred as desired, leaving it open to disruption and possible loss of value. Business Relief may also be of relevance as it will enable your client to pass on some of the business possibly tax free by making a Will. Business Property Relief will form part of another article in this series. There are numerous opportunities available for financial advisers who wish to support their clients in this matter, not only by providing a much needed service to such clients, but also cementing your future relationship with them and their family for the future. BTWC can help support you and your clients in getting the right succession planning in place, ensuring all those years of hard work and commitment are passed on accordingly whilst taking into consideration other aspects such as inheritance tax.   Look out for our next article within this series, focusing on ‘Business Lasting Powers of Attorney’. Call BTWC on 01522 500823 or email enquiries@btwc.co.uk regarding any business succession queries, our team can help!

An Estate Planning Business – your next career move?

        If you’re looking to diversify into a new business area, or wish to establish a new business for yourself that you run and make all the decisions on then becoming an Estate Planner could be appealing for a number of reasons. Estate Planning is a credible and reputable way to establish a new business for those who wish to create their own business profile, work hours that suit you and provide established products and services that can truly help and support you clients’ needs. With Estate Planning you don’t need to undertake lengthy exams to be able to offer the products and services. But with BTWC we do highly recommend going through the training in order to best understand the products and also how to support your clients in the most appropriate way – we do work to regulatory standards to ensure professionalism throughout and happy clients. As an Estate Planner you will be working with products and services such as Wills, Lasting Powers of Attorneys, Property Trusts, Lifetime Trusts, Probate and Funeral Plans just to name a few. The wide range of products means there are multiple ways of meeting client needs suitable to their Estate and Assets as well as their family status. Plus as circumstances change then there is the opportunity to review based on the new situation. BTWC offer a fully supported Estate Planner business model for you to utilise. We don’t leave you with no support in establishing yourself as an Estate Planner. We provide you with the options to utilise our proven business model, provide training and access to a variety of sales, educational and marketing tools and resources. Products available to offer as part of your business include: Simple & Complex Wills Lasting Powers of Attorney Specialist Will Trusts such as protective Trusts for your property Asset Protection Trusts Estate Administration & Probate Services Guaranteed Funeral Planning Advice for Business Owners Co-habitee planning Annual Document Safe Custody   By becoming a member of BTWC you will get: Full training Qualified referrals (to support your own) Direct access to a member of the BTWC team Ongoing full support Product guides and resources Educational tools Marketing material Exclusive territories are available subject to agreed minimum based targets being met   To take control of your own business, grow your client portfolio and benefit from the support of an established business model then just call us on 01522 500 823 or email enquiries@btwc.co.uk.

Lasting Powers of Attorney refund by the OPG

Lasing Powers of Attorney refund scheme A refund scheme for those who have been overcharged for their power of attorney registration has been launched by the Ministry of Justice. The charge for LPA registration is only supposed to cover the cost of the service, but clients were over-charged up to April 2017, when the Office of Public Guardian cut their fee to £82. So for those that registered a Lasting Power of Attorney (LPA) between September 2013 and April 2017 then they can enquire about making a claim. Processes for a LPA become more efficient and the costs came down for the Office of the Public Guardian, but the fee to customers was not reduced down by the Ministry of Justice until April 1st 2017. There is now a refund scheme in place for any of your clients who may have been affected. It has been confirmed that the number of people who may have paid more than they needed to is approximately 1.7 million. Who can claim? A claim can be made if the LPA was made in England or Wales during the timescales above. A client may apply for a claim if they are either the ‘donor’ – the person who made the LPA, or if they are the ‘attorney’ who was appointed by the donor. But to bear in mind the refund must be paid back to the donor, and there can only be one claim per donor. The maximum refund, if the original fee was paid between April 2017 and September 2013, is £54 per power of attorney registered. Amy Peters, Head of Operations at BTWC comments “This is a very positive move by the Ministry of Justice. Clients will be refunded accordingly, but only if they apply online through the government website. Whilst this affects thousands of people it must be remembered that the registration for a LPA is now at the appropriate price and people are no longer affected. An LPA is still an important element for a lot of people when planning their future.” If you are acting for any clients who think they may be affected, then they can visit www.gov.uk/power-of-attorney-refund for more details and to make a claim directly. A Lasting Power of Attorney (LPA) is a legal document that lets your client (the ‘donor’) appoint people (known as ‘attorneys’) to make decisions on their behalf should they become unable to do this on their own. BTWC are not able to assist in making claims for the refund, but if you or your clients have any queries regarding setting up an LPA just contact the team who will be happy to help – 01522 500823.

Residence Nil Rate Band – what you need to know…..

Still unclear on what the Residence Nil Rate Band is about? Here’s what you need to know…..           What is the Residence Nil Rate Band (RNRB)? The RNRB is an additional allowance for inheritance tax. It applies in addition to the existing IHT Nil Rate Band (NRB), which is expected to be frozen at £325,000 until 2021. It’s intended to reduce further any IHT impacts for those with a family home that they wish to pass to their children. There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold. Implementation phased over 4 years The Residence nil rate band (RNRB) came into effect on 6th April last year, and will continue to be phased in until tax year 2020/21. It will be phased as follows: The current allowance for the 2017/18 tax year is £100,000 In 2018/19 the allowance increases to £125,000 This rises to £150,000 in 2019/20 It completes in 2020/21 at an allowance of £175,000   Who does it apply to? It is relevant for specifically for families and each parent who owns a property, or a share of a property, that they have lived in and which is left direct to lineal descendants such as children or grandchildren, step-children, adopted children and foster children. If the client owns more than one property then they can select which property to have the allowance against but must be able to prove they have resided there at a point in time. Transfer between spouses and partners As with the NRB, any unused percentage of the RNRB on the first death can be transferred to the estate of the surviving spouse or civil partner for use on their own death, regardless of when the first death occurred. Just to note if the first death was prior to the RNRB implementation on 6th April 2017 this transfer may still be applicable. It’s important to remember that, as with the NRB, executors must be able to demonstrate what happened to the first persons RNRB, usually via the Will and subsequent estate administration after the first death. Downsizing considerations In regards to RNRB downsizing can refer to moving to smaller properties, but also moving to a cheaper property, or even giving up ownership completely. But clients can still claim their RNRB allowance, but an adjustment will be made based on the value of the property that was sold and the new one. This is known as the ‘downsizing addition’. This element can take a more complex route depending on a number of circumstances and our Professional Executor Services would be strongly recommended if this is likely to be relevant. Many clients are still unaware of the RNRB, or know very little about how it can potentially benefit their families in the future. When looking at the future of their assets and Estate this is an important aspect for consideration and something that clients will no doubt need advice on.   Contact BTWC about how our Estate Planning and IHT services can help you ensure your client makes secure decisions for the future – call 01522 500823.  

New Funeral Plan Range

            BTWC launch new Funeral Plan range Estate Planning services professionals, Beneficial Trust & Will Company (BTWC), are very pleased to be launching their new funeral plan range in partnership with Silver Clouds Funeral Planning. The new range covers a multitude of client requirements and some of the plans can be tailored to suit more unique needs. Competitively priced to help clients implement an affordable solution for the future, the plans range from meeting basic requirements through to comprehensive needs. BTWC support their adviser members by providing a range of Will Writing and Estate Planning products and are pleased to be able to offer trusted and affordable Funeral Plans for advisers to offer their clients. Amy Peters, Operational Director at BTWC comments “As Estate Planning specialists, creating our own BTWC Funeral Plan with a trusted partner such as Silver Clouds means that advisers and their clients can rely on us for a comprehensive service offering everything they need in one place. Our Pre-Paid Funeral Plan options are reflective of our ethos of providing trusted, flexible products for advisers, supported by a strong professional service team who can help with any enquiry. This new range reflects our commitment to providing the right products in our offering.” The range provides flexible payment terms, no restrictions on health, age or medical history and also includes a ‘transfer’ option, meaning a plan can be applied to any family member, including children and grandparents. The team at BTWC will provide support to advisers at any stage of the process to help provide their clients with the best solution for their needs. Silver Clouds Director John Graham, says “We are delighted to be working with BTWC in the provision of funeral plans to their clients.  BTWC are a well-established estate planning group with national coverage.  Together we have formulated a bespoke funeral plan proposition entirely white labelled to the BTWC brand which is both affordable and innovative whilst also being secure and compliant.  The feedback we have received so far has been encouraging and we expect sales to be strong.” You can see more details on the new Plans here. To find out more about BTWC’s Funeral Plans and other Estate Planning services just call  01522 500823 or email enquiries@btwc.co.uk.

8 factors to consider for GDPR

        As an IFA, broker or Estate Planner you may not have really considered General Data Protection Regulation (GDPR) so far (implemented on 25th May 2018). But it’s important to have an awareness of what’s involved so you can make changes if you need to do so. Here are 8 considerations of GDPR, many of these may already be in place and it could be that you simply need to tweak a few areas to strengthen them further: 1. Internal engagement Is everyone in your business appropriately aware of GDPR and committed to making the appropriate changes to ensure compliance? 2. Personal data What personal data do you hold as a business? Where does it come from? How is this data shared internally and with other third parties? Consider plotting out where your data comes from and how you ask for permission to use that data – are there any risks you need to address? 3. Recording of data How do you record the data? How do you update and amend it when required? Do you have the ability to fully delete the data across all records if requested to do so? Clean out any old data you don’t use, there’s no point in keeping it anyway. 4. Data security/breaches How secure is the personal data you have within your business? Is it stored in documents or within a system? Who accesses this data? Are there any restrictions in place? If you have a breach how quickly can you detect this, and report it? You may need to assess and identify any possible risk elements within your data processes and security. The reputational risk to your business could be huge! 5. Consent It’s important that customers have the choice upfront to consent to communications from you. You need to make them aware of how you intend to use their information. Consent cannot be inferred from inactivity or pre-ticked boxes, and you must make it easy for people to withdraw consent. You need to implement this consistently and be able to record customer choices. 6. Individuals rights Does your business allow for all the rights that individuals have? How would you delete personal data, or provide relevant data in an easy to use format? 7. Access requests Customers have the right to access the information you have on them, and you cannot charge for this service. You can however refuse a request if it is ‘manifestly unfounded or excessive’. You must inform the individual why you have refused within one month. All of this must be recorded and processed within the business for future auditing purposes. 8. Data Protection Officers You may need to consider appointing a DPO if you deal in large volumes of personal data, conduct regular and systematic reviewing of data on a large scale or if you are a public authority. You need to ensure you have someone who takes on the responsibility for your data protection compliance with the appropriate knowledge support and authority to support your business effectively. If you are not sure about your compliance in regards to GDPR it could be worth seeking expert legal advice.

Is a Family Settlement Trust an option for your clients?

        This best practice is adhered to by many professionals in the industry, but it is becoming more common for a local authority to challenge a trust on the grounds of ‘deliberate deprivation of assets’ and succeed in getting them overturned. That’s why it’s crucial a trust is set-up with the right intention and the clients is fully clear of their commitments and the impact on surrounding relatives. The primary goal in Estate Planning is to ensure that the solution is right for the individual client and their overall circumstances and planning well in advance to protect and support families is a critical aspect of this. What is a Family Settlement Asset Trust (FSAT)? This is a discretionary trust usually coupled with a life interest used to protect assets such as property, cash, bonds and so on. It is usual for the client (settlor) to reserve the right to use the assets in the trust (to continue to occupy property for example) or have income from them. In these cases, such a right of occupation or right to income is known as a Gift with Reservation of Benefit. When is a FSAT an option? Declining mental capacity  Over 5% of males and 7% of females are diagnosed with dementia/Alzheimer’s. Such illnesses often prevent sufferers from taking decisions due to their incapacity to do so. This means that they cannot make decisions, sign documents, maintain property etc. Property may then fall into disrepair and the individuals wellbeing can be detrimentally impacted as a result of their living conditions. Vulnerable Adults When a spouse dies, the survivor may become vulnerable following the bereavement of their life partner. They may struggle to make decisions alone that previously they would have taken jointly. However, with an FSAT the trustees can take decisions with regard to the property, its maintenance and repairs. The survivor is not alone. The Big Spender A surviving spouse may be reckless with money and indifferent to property up keep. In extreme cases they may get into debt or even bankruptcy and the family’s assets are swallowed up by creditors. With an FSAT, the assets are ring fenced within the Trust. The 2nd Marriage The surviving spouse may be persuaded to make a new Will or may not even get round to making a new Will on re-marriage. This means assets may go to the new spouse without taking into account the interests of the previous family. But with an FSAT, the re-marriage of a surviving spouse is irrelevant, the assets are protected and sideways dis-inheritance is avoided. Care Fees If a surviving spouse ultimately goes into care, the Trustees could opt to rent out the property and utilise the rental income to top up care fees providing more control to the family regarding the standards of care their loved one will receive. This last point is a critical one. The issue is not the avoidance of care fees but the management of care fees contributions, ensuring families remain in control of assets and are able to utilise them in the future should they choose and need to. The advanced preplanning is crucial to ensuring assets pass to the people of the clients choice, most have worked hard over many years and made regular national insurance contributions to ensure they are looked after later in life, so why should they effectively be taxed again! The creation of any Trust requires careful consideration and Trustees should be aware of their duties and obligations regarding the careful, but not necessarily burdensome, administration of the Trust. For more details on the right Trust for your clients just contact BTWC on 01522 789473  

Cohabitation and inheritance rights

        Whilst there is an increase in the number of people who decide to co-habit together, the understanding of what happens to property and assets if one partner dies is still misunderstood. If you have a client who lives with their partner and they have decided they don’t wish to get married or enter into a civil partnership, then the assumption that everything will pass to them is incorrect. If no Will is in place making provision for each partner then there is no automatic right against the estate. If you have a client who is in the position whereby their partner owns most of the assets outright, if that partner were to die then the deceased’s estate would either pass under the terms of their Will, or if they don’t have a Will, the estate will likely pass to their next of kin under the Intestacy Rules. If your client and their partner have joint-ownership over their assets if no Will is made, under the laws of intestacy for unmarried couples, your client would be entitled to their half, but the other half would be shared equally between the deceased’s children (if there are any), so missing the surviving partner. Where there are no children, the estate would be split in the following order: surviving parents, the deceased’s siblings (or their children if the sibling has died), grandparents, aunts/uncles (or their children if they’ve died). This could mean your client may have to share their home with a family member. In the absence of any family members, the deceased’s estate would all pass to the Crown. Therefore making an updated Will to benefit each partner is vital to ensure that further down the line, each is protected and treated as wished, particularly in regards to their property and financial matters. If either partner has made a Will prior to the relationship forming, then it is just as important to get the Will reviewed and updated in order to guarantee the future allocation of assets Trevor Cross, MD, BTWC says, “Making a Will or updating their Will is the only secure way your client can ensure that their wishes for their partner regarding the distribution of property and assets is upheld and legal. As their adviser you have the opportunity to discuss their options with them, and outline the reality of the situation and guide them on the appropriate steps, all of which we can support you with.” For more information just contact us on 01522 500 823 or email us at enquiries@btwc.co.uk