15. The Main Advice Areas Flashcards

1
Q

Protection businesses need

A
  • Death of a key employee
  • Death of a business partner
  • Sickness of an employee
  • Sickness of a business partner
  • Sickness of a self employed sole trader
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Automatic Accrual method

A

All partners enter into an agreement under which, on the death of a partner, his or her share is divided among the remaining partners in agreed proportions.

The deceased partner’s family is compensated by the proceeds of a life policy written in trust for their benefit.

Where automatic accrual is used there is normally 100% business relief for inheritance tax in respect of the deceased partner’s share of the business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Buy-and-sell method

A

All partners enter into an agreement under which, on the death of a partner, the deceased’s legal representatives are obliged to sell the partner’s share to the other partners, who are obliged to buy it.

To enable them to do so, each partner takes out a life policy on their own life in trust for the other partners. One problem is that the person who inherits the share is deemed to receive cash rather than business assets, so in that situation business relief from inheritance tax is not available.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Cross-option method

A

This is basically the same as the buy-and-sell method, except that the agreement specifies that the deceased partner’s estate has the option to sell their business share to the remaining partners, who have the option of buying it.

no legal obligation to do so, those who inherit are deemed to receive business assets, and relief from inheritance tax may be available.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

real rate of return

A

Nominal interest/growth rate minus inflation rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly