Cross Option Agreements

How do Frog Wealth Management’s Company
Wills and Cross Option Agreements Differ?

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Frog Wealth Management offers business Estate planning, tailor-made to suit you and your business. It takes the standard planning options available on the High Street, a significant step further.

Frog Wealth Management’s planning provides this significant protection to your business and reduces the possible impact of IHT dramatically. Furthermore, the business and proceeds from a future sale are protected for the Bloodline from IHT, remarriage, divorce, separation, creditor claims and Nursing Care Fees.

Our planning leaves each partner or Director’s share of their business, to their own Family Trusts through appropriate Clauses written into their own Wills.

Furthermore, the proceeds from the appropriate Life Cover will also be protected, ensuring that these do not impact on the surviving individual’s Estate, which happens all too often.

Once the Cross Option has been executed, our planning ensures the proceeds from any Life Assurance policy also do not form part of the Beneficiary’s Estate.

These funds are now protected against any of the risks named above, yet the surviving spouse and Beneficiaries still have full access to the Trust assets.

Some of our Google Reviews

Very professional and knowledgeable service with great detail and kindness, I have been using frog services now for 12 years and am very happy with the products they find for me
Paul Singh
Paul Singh
1721049224
After trying various agents and insurers, Frog FM was able to secure exactly what I needed and for a reasonable premium. Professional and friendly service. I know who to go to first next time!
Simon Gardner
Simon Gardner
1720201499
I first contacted Frog several years ago and they are now my "go to" company for all financial matters and advice. I have always found them friendly, efficient and easy to deal with, and I applaud their ability to convert "financial jargon" into everyday understandable language.I also especially appreciate that they will contact and remind me when I need to review some aspect of my finances. I can without hesitation fully recommend Frog and all their team members
Roger James
Roger James
1719570412
Charley and Danni have been exceptional in assisting me with managing my insurance requirements. They offer an outstanding and effortless service.
Alex Woodford
Alex Woodford
1718270992
Amazing.Charley and Greg were amazing in listening to my needs and being able to offer the best solution for me.Thank you Charley for your patience with me. You have been incredible.I like the fact that they are a local company.I strongly recommend them.
I have used Frog Financial for several mortgages and cannot recommend them enough. Extremely helpful, professional and efficient and always going above and beyond to make the process as smooth as possible and finding the best options for me. Everyone in the team is brilliant to work with and I will of course be using them for all future mortgages! Sam x
I dealt with Greg to get a mortgage on my first property - he was fantastic, helped educate me on the process as well as coming up with outside of the box solutions, really happy with the service and will 100% use him again in the future.
Tom Evans
Tom Evans
1713279680
An exceptional service given. Everyone we have spoken with has gone above and beyond to help us and answer all questions we have. Can not recommend Frog financial management enough and will be using them again in the future.Helena & Jason
Jason Benn
Jason Benn
1712763206
Greg and the team at Frog Financial have been excellent with finding me a mortgage a couple of years ago and managing the renewal recently. They have been able to find the best deals in the market and provide good options and advice based on our conversations. They are friendly, attentive and responsive and I highly recommend them.
Carl Goodman
Carl Goodman
1712568081
Amazing team could not have done it without them.
Grace Kearns
Grace Kearns
1711487336
Excellent service from Charley on a non-standard building and contents insurance. She was prompt, and knowledgeable, and helped clarify various issues
Phenomenal service. I have and will recommend Frog Financial to everyone. Informative, helpful, great communication, so kind, and we really felt like the whole team cared about us. Took so much of the stress out of the process. We have no doubt that we will use Frog again! 🐸
Elena Prokopiou
Elena Prokopiou
1708805074
Arranged our mortgage deal and building insurance with Frog. They were really helpful throughout the whole process and we would have no hesitation at all recommending to others.
William Oakes
William Oakes
1708085925
Just the best, Greg helped me find a mortgage for my first property when other mortgage brokers couldn't find one to fit my needs. They were great answering any questions I had and helped me a lot throughout the house buying process. Also helped find and set up house insurance. Will be continuing to use them in the future and I highly recommend them.
K.K. Gres
K.K. Gres
1707130758
I was directed to Frog Financial in September 2018 and received excellent financial advice and general guidance. Since then I have requested them to investigate house insurance for me and have always signed up to the suggested policies.I would have no hesitation in suggesting they are approached by my friends to discuss their requirements.
Dave Shirvell
Dave Shirvell
1706109059
Charley was fantastic to work with. She was super efficient, working swiftly to find the best deal and to make it happen. I would be thrilled to recommend her and Frog Financial.
Jackie Samuel
Jackie Samuel
1705480246
The team at Frog did a stellar job of our remortgage, they took the stress out of the process with prompt, friendly and most importantly informative communication which made the whole process a breeze. We would not hesitate Frog to anyone. Thank you!
Lawrence Mills
Lawrence Mills
1705081739
I have been using Craig and Greg for 3 years and I have been very impressed with the service from Frog. The mortgage solutions that I required were fairly unusual and Greg was able to provide a bespoke service to suit my needs.
mark jordan
mark jordan
1704296797
Amazing financial service from Greg and his team.Really friendly, approachable and efficient. No waiting around for anythingGreat knowledge on helping me, they were also very patient and made the experience stress free. I will be recommending them to anyone needing help with mortgage /financial mattersFeel more secure now with help and advice given. Will be back again in 2 years
Amazing service...always a very professional and quick service. Would definitely recommend:)
Clare Over
Clare Over
1702496481
I had a great experience with Frog Financial Management. Right from the start Greg was super reassuring and knowledgeable. As first time buyers we had a lot of questions and the whole team were always on hand to answer them. Greg, Danni and Charley were beyond helpful, always responsive and got everything that we needed sorted out, which added some peace of mind to what can be a scary process!
Alice B
Alice B
1702387954
Frog Financial have been sourcing property finance for me for several years. Always on hand to offer advice in the ever changing and complex world of mortgages! Charley can also source competitive property insurance.
Ben
Ben
1700132135
Craig,Ruth and the team have been fantastic.After a bad experience with another advisor, I contacted Frog.From the start Craig explained exactly how he would apply for the mortgage.My application was not straightforward as I had been Ltd for only one year.Craig, Ruth and the Frog team were extremely persistent at getting me the mortgage and always kept me updated and informed ,even calling out of hours for some reassurance.They are very professional and genuinely nice people, and great at what they do.I cannot recommend them highly enough.
D Farrow
D Farrow
1699305350
Excellent service, very proactive and quick to source our insurance policy renewal options from the market. Would highly recommend them. Charley has been providing great service to us.
Girish BP
Girish BP
1699089350
I’ve used Frog Financial services for nearly 3 years in a row for my home contents insurance. Charley is beyond professional and helpful and is always willing to to go above and beyond with any questions I may have. I would high recommend their services!
AK
AK
1698947412
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The corrently prepared Cross Option Agreement is essential. Check out the other signficent advantages here

What about the impact a standard cross option agreement has on someone’s Estate?

If you or a business partner dies their share will pass to their spouse or Beneficiaries through their Will. This is now deemed to be part of their Estate. Whilst this share is held and the business continues trading, then the assets could be exempt from IHT, assuming they qualify for Business Property Relief (BPR). Once the Cross Option has been affected then BPR is no longer available on the proceeds, i.e. from any life assurance pay-out. The spouse’s assets have now increased by the funds received from the life assurance policy, risking 40% of their proceeds to IHT, which depending on the size of the business could be a significant loss.

These assets are also at risk from attack from any future remarriage claims, creditors or bankruptcy and Long Term Care costs.

What are the consequences a standard Cross Option agreement for the surviving business partner?

With a standard Cross Option Agreement, the surviving partner now owns 100% of the company. This is fine whilst the business is still trading and whilst BPR is still applicable.

What would happen if they decide to sell the business?

Their personal Estate will increase to include the proceeds from this sale. Furthermore, the spouse is wide open to attack from IHT, creditors, bankruptcy, divorce and Long Term Care costs.

(i) Each Director leaves their share of the Business to their Beneficiaries via their Will.
(ii) Cross Option Agreement established to enable one Director to purchase the other Director’s share of the business in the event of their death.
(iii) Life Assurance policies taken out by the company in order to fund the purchase of the shares / partnership.

(iv) On the death of Director, A, his share of the business passes through the Will to his Beneficiaries. The Life Assurance policy pays out. The company can then execute the Cross-Option Agreement, using the Life Assurance proceeds to purchase Director A’s share of the business.
(v) This results in Director A’s Beneficiaries receiving the life assurance proceeds, and Director B owning 100% of the company.

Consequences to
Director A’s Beneficiaries
Consequences to
Director B
Beneficiaries now have the funds from the Life Assurance policy.

These funds are now part of their Estates and so will be assessable for IHT when they die.

These funds are also at risk from claims from divorce, remarriage, bankruptcy and long term care.

3rd Party Claims
Director B will now own 100% of ABC Ltd which is at risk from divorce, remarriage, bankruptcy and long term care.IHT
Whilst trading, Business Property Relief is applicable. However, if he sells the business, the cash proceeds will then be part of his Estate and so will be assessable for IHT when he dies.CGT
On sale, the growth in Director B’s share has increased and hence more CGT payable than necessary.

Example of potential Tax Liability:

If we assume that the business is eligible for Entrepreneurs Relief, then the CGT (CGT) rate is 10%.

CGT payable on sale = £180,000

Example of potential Inheritance Tax (IHT) liability:

Director A and Director B each own 50% of ABC Ltd which is valued at £1,800,000.
Director A dies leaving 50% of the business to his Beneficiaries. The Cross-Option Agreement is executed resulting in £900,000 entering the Beneficiaries’ Estate.

When the Beneficiaries die, the potential IHT bill on these funds is 900,000 x 40% = £360,000
Subsequently, Director B decides to sell the business resulting in £1,800,000 entering his Estate.
When Director B dies, he leaves a potential IHT bill of £1,800,000 x 40% = £720,000

A combined tax bill for the surviving director of £720,000 + £180,000 = £900,000

The potential combined IHT bill = £360,000 + £720,000 = £1,080,000

Please note, the Financial Services Authority do not do not regulate some forms of Trust products and services.

Making a Company Will in your lifetime could not be easier, if set out correctly. All the objectives and aspirations of the shareholder or partners are taken into consideration. With our bespoke service and trained team, we will ensure every aspect is covered to ensure your business Will follows your wishes of your personal Will.

Most adviser’s advice ends at this point and promise to review the protection and needs of the shareholders annually. But what about “beyond-death-planning” of a shareholder, that’s where Frog Wealth Management really specialise and are proud to be head and shoulders above the rest.

As an existing business owner, you’ll have a clear vision of what you want to achieve from it and more importantly what you want when you retire or sell your shares. To maximise the value, you receive for your business it’s essential to think about how you’ll leave it further down the line.

Carefully planning your exit from the business can help you to:

  • Mould your business into the ideal shape for your chosen exit option – maximising the value you get from it.
  • Groom successors if they’re coming from within the business – whether they’re a family member or part of your management team.
  • Exit at a time of your choosing, when the business is doing well and the market conditions are advantageous.

Ideally, you should include an exit strategy in your start-up business plan. It can then be reviewed and revised whenever you work on your annual business plan and budget – and you can steer your business in the direction that your exit option demands.

If you manage an existing business and don’t have an exit plan, you should now think about what your preferred exit option might be – and consider whether you could change the way you run your business to help you achieve it.

The way in which you exit can affect:

  • The value you and other shareholders realise from the business.
  • Whether you receive a cash deal, deferred or staged payments.
  • The future success of the business and its products or services.
  • Whether you retain any involvement in or control of your business.
  • Your tax liabilities.

Presently, shares within your Company can present an issue if the company was to be sold in the future.

Capital Gains Tax (CGT) would usually be charged to the shareholder upon sale. The current full rate is 28%. Entrepreneur’s relief may be available up to the first £5 million for each shareholder. This is dependent on any previous disposals since 6th April 2008 and the trading status of the company. The latter can be affected by the nature of assets held by the company.

Whilst the shares may qualify under current Business Property Relief and so be free from Inheritance Tax (IHT), when sold these shares are replaced by cash, which will be included in an individual’s Estate for IHT purposes and thus taxed at 40%.

Taking appropriate advice from our advisers can maximise the tax efficiency of how you exit from your business and take the proceeds on the sale of your shares, using a Share Release Trust, Shares enter a separate Trust, The Share Release Trust.

This allows:

  • The shares to be sold free of CGT (Shareholder retains his full Entrepreneurs Relief to be used later maybe).
  • Reinvestment can be made CGT free.
  • Income returns are Income Tax free.
  • Share sale proceeds fall outside of the Estate and so, no future IHT liability.
  • The benefit of the tax-free environment means the assets pass down the generations, as the structure is retained for at least 125 years.

Once again, the use of Trusts ensures that the surviving business partner, still retains their original share of the business and still has complete control on the whole business as he/she is named as a Trustee of the Trust(s) which now own the deceased Director’s shares.

This same Trust(s) are also utilised further, as a very efficient income tax planning tool. Now that a proportion of the business is held in Trust any dividends paid into the Trust(s) can be distributed to Beneficiaries of the Trusts, who may well have a nil or low rate income tax liability, such as children, spouse/partner, etc.

Should the surviving Director(s) decide to sell the business only their original share of the business will enter their Estate. The remaining share belongs to the Trust, for which the surviving Director and his/her family are Beneficiaries.

This share is also protected and cannot be assessed for IHT purposes and provides protection from attack by Long Term Care Costs, divorce, and bankruptcy.

If you would like to know how our Cross Option Agreements will benfit your business