When business and personal life are linked

SOME people’s business and personal lives are very closely interwoven while others prefer to keep the two apart.

But business people should consider the legal and financial aspects of their business and personal affairs in tandem.

It is surprising how often people fail to link these two aspects of their lives and end up missing what should be obvious tax-savings or ways of protecting their assets. Here are just three examples.

n Proper succession planning at an early stage in a family business, linked to Inheritance Tax (IHT) planning for the family members.

The permutations are endless but making the most of Business Property Relief and/or Agricultural Property Relief are basics, as is making use of trusts to ensure that money stays in the family rather than potentially being lost through divorce or bankruptcy of someone in the younger generation.

n Making sure that your will works in conjunction with any life insurance policies.

Do you have a death in service policy and can you specify who the beneficiary should be? If your spouse does not need the proceeds of the policy, it may make sense to leave these directly to your children.

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Although the lump sum will fall outside your own estate for IHT purposes, once your spouse inherits the benefit lump sum becomes part of their taxable wealth. So, in some circumstances, passing the benefits via your spouse to your children could amount to giving 40% of the policy’s proceeds away in tax.

n Protecting your business assets pre-marriage.

Many people never consider the idea of a pre-nuptial agreement because they feel it is unromantic or untrusting.

The bottom line is that anyone who has built up substantial business assets before they marry should consider a pre-nup, and the evidence is even stronger that those who are marrying for the second time should do so. Seven out of 10 second marriages end in divorce and the average age for divorce is over 40 and rising.

Where people have children from an earlier relationship, and want to be able to help them financially in the future, this is even more important. Although pre-nups are not yet legally binding, they are now more likely than ever before to be upheld by the courts.

The Ashton KCJ Lifetime Planning and Family Law teams work closely alongside their commercial colleagues to help business clients plan effectively for the future.