Wealth planning conversations for business owners

By Daniel Morgan, Managing Partner, Haines Watts Esher

For the majority of business owners, personal wealth is closely connected with the success of your business, which means business decisions often have a signifi cant impact on your life beyond work. Many owners don’t prioritise personal wealth planning – which can limit options for tax-effective planning, and leave a variety of risks unmanaged.

Here are the top three planning points I talk to my clients about when encouraging them to think about their personal wealth objectives.

DON’T PLAN IN ISOLATION

While business and personal assets should be treated differently when it comes to tax and wealth planning, these need to be viewed in a joined up way in order to make the best decision on how to structure your affairs in the most tax-effi cient manner.

If, for example, you are thinking about purchasing property, or have extra cash in the business, it’s important to think about how you hold these assets and what you do with them in relation to both your business and personal wealth goals. FUTURE PROOF YOUR BUSINESS AND PROTECT YOUR FAMILY

Often neglected is a plan for the possible death or incapacity of an owner. If this were to happen, it’s vital to understand how the assets you hold personally such as shares or property can be transferred to the family in the most tax-effective way, or released so the business can continue to benefi t.

There are many options to explore such as structuring these assets in a trust or Family Investment Company, which can secure these for your family and also mitigate Inheritance Tax consequences.

Shareholder protection can also be useful if it makes commercial sense. This arrangement enables surviving owners to purchase the deceased owner’s shares from their estate which provides the dependents with a source of cash and keeps the business in control of the remaining owners.

SECURING GENERATIONAL WEALTH

There is always a fine balance to be struck between preserving the family’s wealth and planning for Inheritance tax. Essentially, this type of planning involves two options: transferring assets to beneficiaries directly, or through a vehicle that offers protection of your assets like trusts or certain corporate structures such as Family Investment Companies.

Changes to tax rules can often trigger the need to review these plans, whether in relation to the treatment of disposal of particular assets or changes to trust taxation or the treatment of non-domiciled tax payers. This sort of planning works best with longer term strategies and measures being taken over time.

It takes time to develop the right strategy to protect your wealth and pass on your wealth to the next generation in a manner that minimises the tax burden for you and your family and protects your assets for years to come.

It’s never too early to have conversations about how you should structure your business and the ownership of your assets in context of your personal wealth and succession goals. Talk to us today to see how we can support you and your business.