Estate Duty Implications on Buy-And-Sell Agreements Where Shares Are Held in Trust

As a business owner, it is essential to understand the estate duty implications on buy-and-sell agreements where shares are held in trust. A buy-and-sell agreement is an arrangement between business owners that ensures the smooth transfer of shares or interest in a business in the event of a triggering event, such as death, disability, or retirement.

In the case where shares are held in trust, it is important to consider how the estate duty implications may affect the transfer of shares. Estate duty is a tax levied on the value of the deceased estate, and it can have significant implications on the transfer of shares in a buy-and-sell agreement.

When shares are held in trust, the trust becomes the legal owner of the shares, and the trustee is responsible for managing and distributing the shares according to the terms of the trust deed. In the event of the passing of a shareholder, the shares held in trust will form part of the deceased estate and may be subject to estate duty.

The estate duty implications on shares held in trust can be significant, and it is therefore important to consider the impact on the value of the shares and the ability of the remaining shareholders to buy the shares back from the trust.

One way to mitigate the impact of estate duty on the transfer of shares held in trust is to include specific provisions in the buy-and-sell agreement that address the transfer of shares in the event of the passing of a shareholder. For example, the buy-and-sell agreement could stipulate that the remaining shareholders have the first right of refusal to purchase the shares held in trust at a pre-determined price.

In conclusion, estate duty implications on buy-and-sell agreements where shares are held in trust can be significant. It is therefore important for business owners to seek advice from a qualified professional, such as an attorney or accountant, to ensure that the buy-and-sell agreement adequately addresses the transfer of shares in the event of a triggering event, while also taking into account any estate duty implications.