Could you work with your business partner's spouse? - 06/07/2017
The untimely death of a business owner is, of course, very traumatic for his or her family as well as those connected with the business. One of the financial implications may be that the owner’s widow, widower or other beneficiaries inherits the shares but may have an immediate need for money or have no interest in the business; the surviving shareholders/partners may want to buy the shares but might not have sufficient funds available to do so.

By including business protection in a firm’s business plans, owners can help the business to survive and continue trading under seriously challenging circumstances. This type of insurance would provide the surviving shareholders/partners with a lump sum to enable them to buy the deceased’s shares or partnership interest without putting undue strain on the business or creating a need to borrow.

This type of insurance should always be written in a trust to ensure the money goes to the right people. By writing the plan in trust, the money does not form part of the deceased’s estate and is therefore not liable to Inheritance Tax.

Generally, the partners or shareholders pay the premiums out of their own pocket, but can potentially be paid by the business, as long as tax and National Insurance implications are carefully considered.

It is also possible to include critical illness cover in this type of plan, meaning that should a shareholder/partner have to exit the business having suffered a defined critical illness, again a lump sum would be available to buy their shares.

Do take advice before setting up this type of insurance to ensure that both the plan and the trust meet your particular requirements.

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