The Problem to Solve
Just over a year into the agreement, the founder was diagnosed with a terminal illness.
His family soon uncovered a serious and unexpected risk: Inheritance Tax would be payable on the full £4.4 million of deferred payments, even though the money wouldn’t be received for several years and couldn’t be demanded early. The family had no way to convert the future value into immediate liquidity.
Without life insurance, the estate would face a seven-figure tax bill on assets it couldn’t access.
The Breakthrough Approach
Fortunately, ContinuityPoint was brought in early, at the planning stage of the business sale, by the founder’s solicitor.
We identified a significant Inheritance Tax exposure and structured a term life insurance policy held in trust, with the sum insured designed to match the deferred consideration and provide liquidity to the estate via a formal loan from the trust.
We collaborated with our legal and tax partners to ensure the trust, policy, and sale documentation were fully aligned, eliminating the risk of conflict or tax ambiguity. Crucially, by using a loan-back structure, the policy proceeds could be accessed without inflating the taxable estate either now or for future generations. The outstanding loan remains deductible on death, meaning the capital can support the family without ever re-entering the estate. This created a rare opportunity to provide immediate liquidity today while reducing IHT exposure tomorrow and beyond.
What We Achieved
When the founder sadly passed away, the policy proceeds gave the estate immediate access to funds, allowing the IHT liability to be settled in full without selling assets, borrowing, or relying on goodwill from the buyers.
The management team continued with the payment schedule as originally agreed. The business retained its financial stability, and the family received the full value of the sale over time without being penalised.
ContinuityPoint’s early involvement ensured the founder’s legacy was protected, the tax exposure contained, and the full value of what he built passed on to his family. And by structuring the payout as a loan from trust, we created a long-term IHT advantage, ensuring that this wealth can support future generations without ever re-entering the estate.
His legacy didn’t just survive, it became a foundation for generational resilience.
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