Succession planning

Your personal rationale for succession planning will be as unique as your business interests but, in our experience, it is likely to include at least one of the following objectives:

  • Creating a protected pool of assets for dependants and future generations
  • Segregating your investable wealth
  • Recognising that your private equity interests are complex assets and could create significant inheritance tax (IHT) difficulties for your executor (and family): a substantial liability could arise on illiquid assets without the cash to pay the tax due six months after death
  • Possible protection from future potential claims and liabilities. 

When considering your personal and family needs and your wealth protection objectives; what is appropriate is an individual choice. It should be based on your personal circumstances, your assets and priorities and may differ substantially to what works well for your colleagues - even if you are invested in similar assets. Given the pace of change in UK tax legislation, all succession planning should be bespoke and not reliant on gaining a tax advantage.

We would recommend that all private equity executives have an ongoing dialogue with a tax advisor on the structure of their personal assets as their career evolves -  together, you can then develop a strategy and solutions that meet both your current needs and longer term objectives.

As an example of how solutions can differ, a UK tax resident private equity executive should expect to be taxed at a minimum rate of 28% on relevant carried interest gains as they arise. Notwithstanding the obligation to pay the tax, some individuals still choose to make gifts or hold their interests via both onshore and offshore trusts (and in some cases companies) when they consider their wider circumstances and objectives. However, having considered all your options, electing to do nothing might be the right plan for you.

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