Q: My wife and I own 14 rental properties, some of which are HMOs. When we passed the official retirement age we decided to put them into a limited company and appoint our daughter and son-in-law as directors and shareholders. Now their marriage is on the rocks and we are concerned what will happen to the business if they divorce and we die. If we restructured the business, could we put it in trust for our daughter?
A: Putting a family business in trust can be a good way of protecting the business assets and it is an option that is often overlooked when business owners are considering succession planning.
As opposed to being, for example, an incorporated business, a trust is a legal arrangement by which a business is owned and managed by a trustee on behalf of a beneficiary. This arrangement gives the appointed trustee the right to access all assets and fully manage and administer them to run the business, provided they act in the best interests of the business and the beneficiaries.
As the current business owner, you would transfer the business assets into the trust, and as well as being the settlor you could also be the trustee and potentially even a beneficiary. This would allow you to keep the business operational under your experienced management until such time as you decide to retire and take a back seat. It could also reduce the tax burden when you decide the time is right to pass the business on.
Essentially there are two main types of trusts: revocable or living trusts, and irrevocable trusts. A revocable trust would allow you to retain control over business assets during your lifetime and/or amend the trust as needed. Choosing the right type of trust for your particular business will be crucial, so you should make an appointment with a solicitor to ascertain the best solution.
This question has been answered by Harriet Roberts, a Solicitor with GHP Legal. If you would like to speak to someone about this or any other legal matter, please visit our website www.ghplegal.com and use the contact us form, or call us on: Wrexham 01978 291456, Llangollen 01978 860313, Oswestry 01691 659194
