Hi All
I am new to the forum. I have a complex will instruction and I cannot seem to find a precedent online.
My client wants to gift the majority of his shares in his thriving company to his trustees of a discretionary trust for his daughter, a percentage shares into an Employment Ownership Trust for his key employees with the remainder to his grandchild absolutely.
I have not had tremendous experience with drafting EOTs in a Will.
Can someone kindly point me in the right direction as I cannot seem to locate a precedent will.
I love employee trusts. Absolutely fantastic things in the right circumstances. But they come in lots of flavours and so you need to think about that before randomly choosing a precedent. If the exemption in s28 IHTA is important then the trust deeds needs to be carefully drafted in relation to excepted persons. You might want an employee trust that allows tax-free bonuses (per Chapter 10A Part 4 ITEPA) to be paid. For that, the trust deed needs to be different as there are lots of specific tax conditions that need to be considered.
If it is just a common-or-garden employee trusts then you also need to consider what is going to be done with it and choose a precedent appropriate for that (e.g. if it is going to be used with share plans then it would normally make sense to ensure that it is an employees’ share scheme (per CA) to get within some of the exemptions.
You also need to think about who the trustees will be. If you don’t want to go to the expense of a professional trustee then I’d suggest setting up a dormant subsidiary (of the company whose shares are being settled) to be the trustee, with the individuals you want to be trustees being directors of that trustee company. Depending what the employee trust does / what is expected to happen then it may make sense to use an offshore trustee from a tax perspective (reduces the risk of a capital gains tax bill).
There are lots of precedents out there from paid resources (and even from the government for the tax-favoured ones). One things that is not in the precendents / drafting notes is all the things that can go wrong from a PAYE perspective (e.g. if the trustee earmarks something then PAYE/NIC is due, if the trustee lends some money then PAYE/NIC is due). So clear advice should be given around that too.
The thing that reassures me about the original post is the word “thriving”. But I don’t know what your facts are. If, for example, the exemption in s28 was being targetted and there was, say, just cash and/or rental property in the company with no employees (other than the directors who are family members) then you need to take advice on GAAR. Where there is just cash / passive investments in the company then, other than really exceptional circumstances (e.g. the cash is there to buy or set up a business and there is a great business plan with skilled people ready to set it up) it would be a silly idea. And Parliament recently stopped s28 being used with deathbed planning.