● EXPERT ESTATE PLANNING REVIEW Andrew Walters MSWW | Business & Estate Planning

Business Trusts (UK)

Estate planning for business owners who want greater control over how shares, business interests and family wealth are managed after death.

What is a Business Trust?

A Business Trust is an estate-planning arrangement that can allow business shares or interests to be held and managed by trustees for chosen beneficiaries rather than passing directly to them immediately.

In simple terms, a Business Trust can provide a structure for what happens to your business interests after your death instead of simply leaving them outright to an individual beneficiary.

For many business owners, their company or business interest is one of the most valuable assets in their estate.

Without suitable succession planning, shares or other business interests may pass under the terms of a Will or intestacy rules, subject to the company's own governing documents and any shareholder or partnership agreements.

A trust can provide additional control over how those interests are held, managed and ultimately dealt with for the benefit of your chosen beneficiaries.

Do I need a Business Trust?

Not every business owner needs a Business Trust. It may be worth considering if you own shares or another business interest and do not want that asset simply passing outright to a beneficiary immediately after your death.

A Business Trust may be relevant where your business forms a significant part of your estate or where succession is more complicated than simply leaving shares directly to one person.

You own shares in a company

You may want greater control over how those shares are managed and ultimately passed to your family.

Your children are not ready to run the business

A direct inheritance may not always be appropriate where beneficiaries are young or have no experience managing the company.

You have several beneficiaries

A trust can provide a structure for managing business interests for more than one beneficiary.

You want to separate ownership from control

Trustees may be able to manage trust assets while beneficiaries retain the economic benefit, depending on the arrangement.

You have a blended family

Additional planning may help balance business succession with provision for a spouse, partner, children or other beneficiaries.

Your business is a major part of your estate

A business owner may need more detailed succession planning than would normally be provided by a simple Will alone.

What happens to my business when I die?

What happens to your business after death depends on how the business is structured, what you own, the terms of your Will and any shareholder, partnership or other governing agreements.

A sole trader, shareholder, partner and member of an LLP can each have very different succession issues.

For a company shareholder, it is generally the shares in the company—not the company's underlying assets—that form part of the shareholder's estate.

Your estate plan should therefore be considered alongside the company's Articles of Association, shareholder agreements, partnership agreements or other contractual arrangements.

Important: A Will or trust should not be prepared in isolation from your existing business agreements. Restrictions on share transfers, buy-back provisions and succession arrangements may affect what can happen to your business interest.

How does a Business Trust work?

A Business Trust can work by directing qualifying business interests into a trust structure, where appointed trustees manage those assets according to the trust terms for the benefit of the chosen beneficiaries.

The exact structure depends on your business, family, objectives and the type of trust being used.

STEP 01

Review the business

Establish what you own, how the business is structured and what existing agreements are already in place.

STEP 02

Decide who should benefit

Identify the family members or other beneficiaries you ultimately want to benefit from the business value.

STEP 03

Choose appropriate trustees

Select people capable of managing the trust responsibly and dealing with the business interests involved.

What can the trustees do?

Their powers depend on the terms of the trust. Depending on the structure, trustees may need to deal with matters such as retaining shares, exercising voting rights, receiving dividends, selling business interests or distributing value to beneficiaries.

Leaving business shares directly vs using a Business Trust

Whether shares should pass outright or through a trust depends on the business and your objectives.

Issue	Direct Inheritance	Business Trust
Who receives the asset?	Named beneficiary receives the business interest directly.	Trustees hold or manage the interest for beneficiaries.
Control	Beneficiary normally controls their inherited interest directly.	Control can be exercised by trustees according to the trust terms.
Young beneficiaries	May require additional arrangements before they can manage the asset.	Trustees can potentially manage the asset while beneficiaries are younger.
Multiple beneficiaries	Business interests may be divided between several people.	Trust structure may provide a more centralised approach to managing the interest.
Flexibility	Usually less ongoing control once ownership has passed outright.	Depends on the trust terms and powers given to the trustees.

What should a business owner consider?

Business succession planning should consider your Will, business structure, shareholder or partnership agreements, intended beneficiaries, trustees and the relevant tax consequences together.

Business structure

The planning available for a limited-company shareholder may differ substantially from planning for a partnership, LLP or sole trader.

Existing agreements

Shareholder agreements, Articles of Association, partnership agreements and option arrangements can all affect what happens following the death of an owner.

Who should control the business?

The people you want to benefit financially from the business may not necessarily be the same people you want involved in its management.

Tax

Business succession and trust planning can have inheritance-tax, capital-gains-tax and other tax consequences. The position depends on the business, the assets involved and the law applying at the time.

Tax advice: Xwills can help with estate-planning documents, but specialist tax or accountancy advice may also be required before implementing a Business Trust arrangement.

How much does a Business Trust cost?

The cost of Business Trust planning depends on the structure of the business, the type of trust required, the number of owners and beneficiaries, and the complexity of the succession arrangements.

Business planning is generally more bespoke than a straightforward Will because the existing company or partnership documents also need to be considered.

Following an initial review, Xwills can explain the estate-planning work required and provide a clear fee before you decide whether to proceed.

Key Takeaways: Business Trusts

● A Business Trust can provide additional control over how business interests are managed after death.
● It may be relevant where shares would otherwise pass outright to children or other beneficiaries.
● Business succession planning should be considered alongside your Will and existing business agreements.
● Trustees can manage trust assets for beneficiaries according to the terms of the trust.
● Tax and accounting advice may be required for more complex business arrangements.

Frequently Asked Questions About Business Trusts

Can I leave my business to my children?

Potentially, yes. How business interests pass depends on your ownership structure, Will and any company or partnership agreements. Whether outright inheritance is the best approach depends on your circumstances.

Can business shares be placed into a trust?

Business shares can potentially be held within a trust structure, subject to the company's governing documents, ownership arrangements, tax position and the terms of the trust.

What if my children do not want to run the business?

Benefiting from the value of a business does not necessarily require a beneficiary to run it personally. Succession planning can consider ownership, management and financial benefit separately.

Who should be trustee of a Business Trust?

Trustees should understand their responsibilities and be capable of dealing with the assets involved. For a Business Trust, relevant commercial experience may also be an important consideration.

Does a Business Trust save inheritance tax?

A Business Trust should not be created on the assumption that it automatically reduces inheritance tax. Tax treatment depends on the business, the type of trust, eligibility for any applicable reliefs and the law in force at the relevant time. Specialist tax advice may be required.

Do I need a Business Trust as well as a Will?

A Business Trust would normally form part of a wider estate plan rather than replacing the need for a Will. Your Will, trust planning and business succession arrangements should work together.

What would happen to your business if you died?

Speak with Andrew Walters MSWW for a no-obligation review of your business succession and estate-planning requirements.

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