Shares for family
Client is doing very well, thank you, despite the economic gloom for everybody else. The co-founders and shareholders now regret not issuing shares to spouses and minor children when the company started. What would be the tax implications if they now rectified that?
Spouses both work a bit in the business but the familial relationship would presumably exempt these shares from the employee share rules? But would the dividend income be at risk of attack as a settlement or similar? (I'll admit at this point that the tax treatment of shares seems to have developed into a lacuna in my knowledge).
Dividend income on the minor children would still be taxable on the parent, I assume. Is it still possible to avoid that problem by way of a trust (ignoring the practical problems with trusts for a minute) or was that effectively knocked on the head a few years ago when it was all change? If, on the other hand, a hit is accepted now by gifting the shares directly to the children, what happens re the income once they reach the age of majority? Does it just become their income or would there still arguably be a settlement?
Many thanks in advance for any and all responses.