Hi, thanks for these enlightening examples! I don’t know why, but I only found this channel now.
I have a few questions regarding this so-called “forced” generation transfer and specifically how SVOP (Invested unrestricted equity fund) behaves in this situation.
Background: An investment company where two members of the next generation each own 35% of the company and the parents own 15% each. SVOP investments have been made into the company by each shareholder. The investments are less than 10 years old, bear no interest, and are all earmarked for their respective investors. However, it has turned out that the parents are wealthier than their children, and as a result, they have made larger SVOP investments into the company—for example, the children made €20k investments and the parents €50k. The end result is a somewhat contradictory relationship between ownership stakes and the investments made.
My questions:
- If the company does not return the SVOPs/returns them partially (while maintaining the discrepancy between ownership and investments) and the parents pass away, do the SVOP receivables simply transfer to the estate, from which the heirs then pay inheritance taxes, thereby inheriting the receivables from the company?
- If this is the case, does it mean that the heirs first pay inheritance tax on the SVOP and then capital gains tax when withdrawing the SVOP from the company?
- Can the SVOP be revalued in the case of the estate? That is, if there is uncertainty related to the receivable, can its value be different from the actual investment?
The easiest way would probably be to aim to return the SVOPs to the older individuals tax-free (<10 years), which the next generation would then inherit and subsequently make their own investments into the company or elsewhere.
Thank you!