What if an owner leaves the business?
For protection policies onlyWed Feb 15 10:37:00 GMT 2017
General partnerships and limited liability partnerships (LLPs)
If a partnership, including a limited liability partnership, is dissolved other than because of the settlor’s death or the partner or member resigns or retires from the business before a death/critical illness claim, then any subsequent claim proceeds will be held for the settlor absolutely. The trustees can assign the life policy to the departing partner or member and they subsequently may decide to assign this to another trust such as our Flexible Trust. The beneficiaries of the Flexible Trust include the family members of the settlor, so the departing partner could use the life policy for personal protection.
If a shareholding settlor stops holding shares in the company, for any reason other than their death, and before a death or critical illness claim, then any subsequent claim proceeds will be held for the benefit of the settlor absolutely. The trustees can assign the life policy to the departing shareholder and, as above, they could decide to assign the policy into a Flexible Trust.
General partnerships, LLPs and limited companies
The ‘revolving door’ clause means that the departing owner will automatically be removed as a beneficiary of the business trusts set up by the others. If the departing individual is a trustee of the others’ policies, it would be usual for them to retire as a trustee. We can provide a sample deed for this purpose.
Trusts establish legal rights and entitlements and might have material financial and tax implications for the Settlor, Trustees and Beneficiaries. Aegon UK is not authorised to provide legal advice, so you should take your own legal advice before setting up a trust, to make sure that it meets your requirements. Our trusts have been drafted for use by UK domiciled individuals.