Moneytree Wealth Management
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Shareholder Protection

These can be difficult products to understand and sometimes there can be solicitors and accountants involved. They’re put in place to state how the shares will be managed if a shareholder passes away. It prevents them being passed to someone who has no interest in them and gives the shareholder’s family assurance they’ll get an agreed sum for the shares.

This is known as a ‘cross-option agreement’ and is standard practice in shareholder protection insurance policies.

What are my options?

There are three main type of shareholder protection insurance. Each of them is designed to pay out a lump-sum that’s used to buy the shares of the deceased shareholder. They usually use something called ‘premium   equalisation’ to work out a fair distribution of costs and benefits.

If there are two shareholders in a business, the best way to set up shareholder protection insurance is with a ‘life of another’ policy. This pays out a lump sum to the surviving partner to purchase the deceased partner’s shares.

Another option is for each shareholder to have their own policy in the form of a business trust, so any payouts are shared equally when one passes away.

Alternatively, the policy can be bought by the company direct. It’ll pay the premiums and get the lump-sum payout.

Things to think about

  • The cost of cover depends on the health, age and lifestyle of the person covered.
  • If an individual pays the premiums, it has to come out of taxed income.
  • If a business pays the premiums, it can be classed as an expense. However, the individual insured will have to pay income tax, as they’ll be receiving benefit in kind.
  • These are complicated products, so you really need to understand what you’re buying.

If you’d like to talk to us about shareholder protection insurance, please get in touch. The easiest way is to use the pop-up form on the right of this page. You can call us on 01244 47010  or send an email to:  if you prefer.

Tax treatment varies according to individual circumstances and is subject to change.

Martin Dudely

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