www.lonsdaleservices.co.uk 1
Inheritance Tax
An introductory guide
2 Lonsdale Services Limited
People generally find speaking about money difficult. Every family is different and it is a difficult decision to know when it’s the right time to involve your older children in financial planning. We have found when clients took our advice and spoke to children it can help the family formulate a cohesive financial plan to benefit everyone. Our clients often tell us how grateful they are for encouraging them to discuss their finances openly, and they feel a sense of relief that everyone knows and understands their financial priorities. Neil HomerFinancial Adviser Lonsdale Services
3 Introduction
3 Howourfinancialadvisersassistyouwithestateplanning
3 EstatePlanningChecklist
4 WhatisInheritanceTaxandwhenisitpaid?
5 Howtodeterminewhatisincludedandwhatisconsidered
outsideyourestatewhencalculatingIHT
6 HowmuchisyourNilRateBand?
8 Lifetimegifts
10 CalculatingtheIHTdueondeath
11 PayingtheInheritanceTax
12 Case Study – Gifting to Grandchildren
Contents
www.lonsdaleservices.co.uk 3
Introduction
This introductory guide to Inheritance Tax (IHT) and estate planning provides a basic understanding of when IHT might be chargeable on an estate and lifetime gifts. It also reviews how any subsequent tax liability may be calculated.
DuringthenextthirtyyearstheUnitedKingdom
willexperiencealargetransferofwealthbetween
generations.Withtheriseinpropertypricesand
investmentvalues,morefamiliesfindthemselveswith
estateswhicharepotentiallyliabletoInheritanceTax.
Oneofourmainrolesasindependentfinancialadvisersis
toassistclientswiththeirestateplanningandencourage
clientstoconsiderfinancialplanningonafamily-wide
basis.Ourclientswanttopassonaccumulatedwealthto
thenextgenerationsotheirbeneficiariesinheritasmuch
oftheirestateaspossible.
Weworkcloselywithclientsandifnecessarytheirother
professionaladviserstoensurefinancial,legalandtax
planningisalljoinedup.WeuseaLifetimeFinancial
Planningtooltoensureourclientshaveenoughmoney
toliveonfortherestoftheirlife.Lifetimefinancial
planningshowsclientshowdifferentchoicesaffecttheir
inheritancetax.
Wereviewyourpersonalassets–yourhome,
investments,savingsandotherpossessionstocheckifyou
willbeliabletopayinheritancetax,wethenofferyoua
taxefficientsolutionthrougheffectiveestateplanning.
Estate Planning Checklist
Haveyouwrittenawill?
Isyourcurrentwilluptodate–hasittakenintoaccountyourbeneficiaries’circumstances?
Doyouhavehealthcareproxiesandlastingpowersofattorneyinplace?
Haveyouabusinesslastingpowerofattorneyinplace?
Whoareyourestatebeneficiaries?
Haveyouvaluedyourfinancialassets?
Wouldyouconsidergivinggiftsinyourlifetime?
Doyouhavesurplusincome?
Doyouneedfurthergrowthonyourassetsinsideyourestate?
Couldyouaffordtogiveupaccesstosomeofyourcapital?
Doyourequireawholeoflifeinsurancepolicy?
How our financial advisers assist you with estate planning
4 Lonsdale Services Limited
InheritanceTaxisataxthatmaybepayableonyour
‘estate’whenyoudie.Itcanalsoapplytocertaingifts
madeduringyourlifetime.IngeneralIHTwillbedueif
thevalueofyourestateondeathisgreaterthanyour‘nil
rateband’.
What is the nil-rate band?Thenilrate-bandisthevalueofanestatethatisnot
subjecttoInheritanceTaxintheUnitedKingdom.
Thestandardnilratebandfor2018/19 is £325,000,
althoughtheamountavailabletoyoucouldbedifferent
dependingonindividualcircumstances.Ifthevalueofyour
estateondeathisgreaterthanyournilratebandyouwill
beliableforIHT,theexcessisgenerallytaxedat40%.
Residence nil rate band (or additional threshold)Thereisalsoanadditional£125,000ofnilrateband(in
2018/19)whichcanbeclaimedifthefamilyhomepasses
todirectdescendants(children,grandchildrenetc.)on
death.Aswiththemainnilratebandyoucanalsoclaim
anyunusedpartoftheallowancefromyourspouseorcivil
partneriftheydiebeforeyou.
Additionalresidencenilratebandwillbephasedasfollows:
2019/20 – £150,000
(or£300,000formarriedcouples/civilpartners)
2020/21 – £175,000
(or£350,000formarriedcouples/civilpartners)
What is Inheritance Tax and when is it paid?
Case Study ExampleEdwardHillhadahomeworth£525,000when
hedied.Hehadnodirectdescendantssohis
estatecouldnotclaimanyresidencenilrateband.
Thereforehisnilratebandis£325,000.
TheInheritanceTaxwouldbechargedon£200,000
as£525,000-£325,000=£200,000.
IfIHTischargedat40%theamountthatEdwardHill’s
estatewouldoweis40%of£200,000=£80,000.
www.lonsdaleservices.co.uk 5
IfyouareaUKdomicileoradeemedUKdomicileyour
estatefortaxpurposeswillbethevalueofalltheassets
youowneveniftheyareinothercountries,otherwise
justUKassetswouldbetakenintoconsiderationfor
estateplanningpurposes.Forestateplanningthis
includesyourfamilyhome,anyotherproperties,cars,
savings,investmentsandpersonalpossessions.Ifyou
madeanygiftsinthelastsevenyearsbeforeyoudied
thesemayalsoformpartofyourestate.Ifyouowe
anyonemoneyandhaveliabilitiesthesewillbededucted
fromthevalueofyourestate.
Rememberthatpensionsavingsarenotnormallyincluded
aspartofyourestateasyourpensionproviderwillusually
decidewhereanyremainingfundsarepaid,andnotyour
executors.Werecommendyoucompleteanexpressionof
wishesformsoyourproviderknowswhoyouwouldlike
tobenefitfromyourpensiononyourdeath(althoughthis
isn’tbindingonthepensionprovider).
How much of your estate is taxable?TherewillbenoIHToncertainassetsinyourestate.
Theseinclude:
Assetsgiftedtoyourspouseorcivilpartner
Assetsgiftedtocharity
Businessassets,suchassharesinafamilybusiness,or
other‘unlisted’shares,whichyouhaveownedforat
least2years
Agriculturalproperty,suchaslandusedforfarming
andthefarmhousesituatedonthatland.
However,youcanalsoget50%BusinessReliefon:
Sharescontrollingmorethan50%ofthevotingrights
inalistedcompany
Land,buildingsormachineryownedbythedeceased
andusedinabusinesstheywereapartnerinor
controlled
Land,buildingsormachineryusedinthebusinessand
heldinatrustthatithastherighttobenefitfrom
Youcanonlygetreliefifthedeceasedownedthebusiness
orassetforatleast2yearsbeforetheydied.
Afterthesereliefsandexemptionsaredeductedfromyour
estate,theremainingestateoveryour‘nilrateband’is
taxedat40%(or36%ifatleast10%ofthenetestateisleft
tocharity).
How to determine what is included and what is considered outside your estate when calculating IHT
6 Lonsdale Services Limited
Yournilratebandcanbemadeupofseveralparts:
Your own nil rate bandEachindividualiscurrentlyentitledtoanilrateband
worth£325,000.Thisfigureisforecasttoriseinlinewith
inflationfromApril2021.Ifyoumadegiftswithinthe
sevenyearsbeforeyourdeaththesewillreducethenil
ratebandandtheavailablebalancewillbesetagainst
yourestate.
Transferable nil rate bandIfyourspouseorcivilpartnerdiesbeforeyou,your
executorscanclaimtheunusedpercentageofyour
partner’snilratebandandapplythatpercentagetothe
nilratebandinplaceonyourdeath(currently£325,000).
Thereforeifyourspouselefteverythingtoyouwhenthey
died(meaningtheyusednoneoftheirownnilrateband),
youcouldhaveupto£650,000currentlytosetagainst
yourestatebeforeyoustartpayinginheritancetax.But
moneylefttoothersonfirstdeath,suchaschildrenor
grandchildren,canreducetheamountwhichcanbe
transferredonseconddeath.
How much is your Nil Rate Band?
Case Study ExampleIfAnneJonesthewifeofJohnJonesdiedfirstand
giftedhalfofhernilratebandtotheirchildrenand
everythingelsetoJohnJones,Johnwillbeableto
claimthe‘unused’,50% partofherNilRateBand.
Thereforehisband(atcurrentlevels)wouldbe
£487,500(£325,000 + £162,500).
Residencenilrateband(oradditionalthreshold)
Theadditional£125,000ofnilrateband(in
2018/19)canbeclaimedifthefamilyhomepasses
totheirdirectdescendants(children,grandchildren
etc.)ondeath.Aswiththemainnilratebandyoucan
alsoclaimanyunusedpartoftheallowancefrom
yourspouseorcivilpartneriftheydiebeforeyou.
However,ifyourestateexceeds£2,000,000this
allowancewillstarttobeeroded,andtheadditional
nilratebandwillbetaperedatawithdrawalrateof
£1forevery£2overthethreshold.In2020/21,if
thenetvalueofthedeceased’sestateisgreaterthan
£2.35milliontherewillbenoresidencenilrateband
availableonthefirstdeath.In2020/21thisnumber
willbe£2.7milliononthedeathofthesecond
spouse,aslongastheirownandtheirdeceased
spouse’sresidencenilratebandarebothavailable.
www.lonsdaleservices.co.uk 7
Case Study ExampleNickandMelaniejointlyownedtheirhome.OnNick’s
deathMelanieinheritedhisshareofthefamilyhome
andhiswillalsoleftallhisotherassetstoMelanie.
Nickhadnotusedhisnilratebandof£325,000.
Hisresidencenilratebandhasnotbeenusedasthe
familyhomedidnotpasstodirectdescendants.
MelaniecanclaimbothNick’sunusednilratebandand
residencenilrateband.IfMelanie’sestateistobesplit
betweenherchildrenJamesandSusanshewouldhave
thefollowingnilratebandsin2018/19;
Mainnilrateband£650,000(2x£325,000).
Residencenilrateband£250,000(2x£125,000).
Theresidencenilratebandcanstillbeclaimedifyou
nolongerownpropertyonyourdeathaslongasa
qualifyingpropertywasdisposedofonorafter8
July2015andequivalentassetsarepassingtodirect
descendantsondeath.Thisistoensurethatanyone
thatneedstoselltheirhomeordownsizedoesn’t
loseoutontheirresidencenilratebandentitlement.
SoforexampleifMelaniehadtodownsize,gointoa
residentialcarehome,ormoveintoanursinghome
theresidencenilratebandcouldstillbeclaimedif
equivalentassetsarepassingtodirectdescendantson
herdeath.
Theresidencenilratebandissettoriseto£175,000
by2020/21soeligibleindividualscouldbepayingno
taxonthefirst£500,000(£325,000+£175,000)of
theirassetsin2020/21.Thisrisesto£1m on second
deathin2020/21iftheycanclaimanunusednilrate
bandandresidencenilratebandfromtheirdeceased
spouse/civilpartner.Bothtypesofnilratebandare
expectedtoincreaseinlinewithinflation(CPI)from
April2021onwards.
8 Lonsdale Services Limited
Lifetime gifts
Anyonewhocanaffordtomakegiftsduringtheirlifetime
cansignificantlyreducetheamountofIHTpayableon
theirestate.Agiftyoumakeduringyourlifetime(unless
anexemptgift)willnotbeincludedinyourestateif
youarestillaliveaftersevenyears.Exemptgiftsare
immediatelyoutsideyourestate.Fourtypesoflifetime
giftexistfortaxpurposes:
Potentially Exempt Transfers (PETs)Themostcommontypeoflifetimegiftisanoutrightgift
toanindividual.Therewillbenoimmediatechargetotax
thevalueofthegiftanditwillbecompletelyfreeofIHT
providedyousurviveitbysevenyears.
Ifyoudiedwithinthesevenyearperiod,thevalueofthe
giftwhenitwasmadebecomeschargeabletotheestate
andisincludedinthevalueofyourestatecalculationto
workouthowmuchIHTisdue.
TodecidewhoactuallypaysIHT,yournilratebandwillbe
allocatedtoyourlifetimegiftsfirst,withanybalanceused
againsttheassetsinyourestateatthedateofdeath.
IfthevalueofyourPETsinthesevenyearspriortoyour
deathislessthanyournilrateband,thennotaxisdueon
them.Butthiswillmeanthatmoreofyourestatewillbe
taxableat40%astheywillhaveuseduppartofyournil
rateband.
IfthevalueofyourPETsinthesevenyearspriortoyour
deathisgreaterthanyournilrateband,therewillbetax
topayonthesegiftsat40%ontheexcess.Thistaxshould
bepaidbythepersontowhomthegiftwasmade.Thetax
billcanbereducedby‘taperrelief’,buttoclaimthisthe
donormusthavesurvivedthegiftbyatleastthreeyears.
Thiswillalsomeanthatthereisnonilratebandleftfor
theestate,andsoitwillallbetaxableat40%.
Chargeable Lifetime Transfers (CLTs)Chargeablelifetimetransfers
aredifferenttoPETsbecause
wheretheyarelargeenough
youcouldhaveanimmediate
taxchargeatthetime
theyaremade.ChargeableLifetime
Transfersaretypicallygiftsintocertaintrusts(interestin
possessiontrustsanddiscretionarytrusts).
IfyoumakeaCLTwhich,whenaddedtoanyother
CLTsmadeintheprevioussevenyears,ismorethan
youravailablenilrateband,(thisdoesnotincludethe
residencenilratebandortheunusedbandofadeceased
spouse),animmediate20% Inheritance Taxchargeis
madeontheexcess.
Case Study ExampleWilliamgifts£400,000intoadiscretionarytrust.He
hasmadenootherCLTspreviously.Therewillbea
20% IHTchargeontheamountovertheavailablenil
rateband.
(£400,000-£325,000)x20% = £15,000 IHT due
bythetrustees.Ifthetrusteespay,therateoftaxis
20%.IfthesettlorpaystheInheritanceTaxinstead
ofthetrustee,thismeanstherewillbeanincreased
lossfromthesettlor’sestate.Theamountoftaxwill
thereforeincrease.
TheremainingtaxationisverysimilartoaPET.
Therewillbenofurthertaxtopayifyousurvivefor
sevenyears.Ifthevalueofthegiftisaddedbackin
toyourestateifyoudiewithinsevenyearsitwillbe
taxedat40%ifinexcessofthenilrateband.
Taperreliefisagainavailabletoreduceanytax
payable.Anytaxpaidat20%whenthegiftwas
madecanbeusedtooffsettaxpayableondeathbut
therecanbenotaxreclaim.
www.lonsdaleservices.co.uk 9
Exempt giftsGiftstoyourspouseorcivilpartnerarefreefromIHT,
asaregiftstocharities.
Youcanalsogiveawayupto£3,000eachtaxyearto
whomeveryouchoosewithoutitcountingtowardsyour
estateifyoudie.Alsoifyouhaven’tusedyourannual
giftingexemptionintheprevioustaxyearyoucangoback
andclaimanextra£3,000fromtheprevioustaxyearas
longasthecurrentyear’sallowanceisusedfirst,allowing
anIHTfreegiftofupto£6,000.
Itisalsopossibletomakeregulargiftsoutofyourincome
whichwillbeimmediatelyoutsideyourestate.Thereisno
limitonthesizeofthegiftaslongasyouhavesufficient
surplusincomefromwhichtomakeit.
Inadditionyoucangiftupto£250toanyoneinanytax
yearaslongasyouhaven’tgiftedanythingelsetothe
sameperson.
Everytaxyearyoucangiveawayweddingorcivil
ceremonygifts.Thiscanbeupto£1,000perperson
or£5,000foryourchildand£2,500foragrandchildor
great-grandchild.
Gifts with reservationIfyoucontinuetobenefitfromanygiftsyoumakethey
willnotbeeffectiveforIHT.Forexample,ifyougaveyour
hometoyourchildrenbutcontinuedtolivethererent
freethiswouldbeagiftwithreservationandthemarket
valueofthepropertywouldremaininyourestate.
Case Study Example (continued)IfWilliamdied4yearsaftermakingthegift,furtherIHTmaybepayable.Assumingthenilratebandatdeath
remains at £325,000.
IHTatthefullrate(£400,000-£325,000)x40% = £30,000butiftheindividualdiesbetween4and5yearsafter
makingthegiftonly60%ofthefullIHTliabilityispayable.
IHTreducedbytaperrelief(£30,000x60%)=£18,000 lessIHTalreadypaid=£15,000(seeexampleabove)
Sotrusteeshaveafurther£3,000topay.(£18,000-£15,000)*
*Pleasenote:Ifyoudiewithin7yearsofmakingatransferintoatrustyourestatewillhavetopayInheritanceTax
atthefullamountof40%.Thisisinsteadofthereducedamountof20%whichispayablewhenthepaymentismade
duringyourlifetime.Inthiscaseyourpersonalrepresentative–whomanagesyourestatewhenyoudie–willhaveto
payafurther20%outofyourestatebasedonthevalueoftheoriginaltransfer.
10 Lonsdale Services Limited
Ondeaththevalueofyourestateisthetotalofall
yourassetslessyourliabilities.Liabilitiesincludeany
outstandingtaxorloanswhichmustberepaid.Added
tothiswillbeanyPETsorCLTsmadeinthesevenyears
beforedeath.
ThereisnoIHTpayableonanypartofyourestatewhich
ispaidtoyourspouseorcivilpartnerorifyoupayit
tocharity.Businesspropertyreliefcanmeancertain
assetsrelatedtoatradingcompany,suchassharesina
business,arefreeofIHT.Asimilarreliefappliestocertain
agriculturalproperty.
Inheritancetaxischargeableat40%ifthetotalassetsnot
coveredbytheseexemptionsaregreaterthanthenilrate
band(andresidencenilratebandifavailable).Thiswill
includeanytransferablenilratebandorresidencenilrate
bandofadeceasedspouseorcivilpartner.PETsandCLTs
madewithinsevenyearsofdeathwillhavefirstuseofthe
standardnilratebandintheorderinwhichtheyweremade.
Whoisresponsibleforpayingtheinheritancetaxon
yourdeathdependsuponwhatpartoftheestateis
subjecttoIHT:
A failed PET–usesupsomeorallofthenilrateband
availabletotheestate(thusincreasingthetaxpayable
bytheexecutorsontheestate)–ifthePETexceeds
theavailablenilratebandtaxontheexcessamountis
payablebytherecipientofthegift
A failed CLT–taxispayablebythetrusteesofthe
lifetimetrust*.Anytaxpayableat20%whenthegift
wasmadecanbeoffsetagainstthetaxdueondeath
(buttherecanbenoreclaim).
Your estate–taxispayablebyyourexecutors
Please note-TherateofIHTisreducedto36%wheregifts
tocharityexceed10%ofthenetvalueoftheestate.
*Ifyoudiewithin7yearsofmakingatransferintoatrust
yourestatewillhavetopayInheritanceTaxatthefull
amountof40%.Thisisinsteadofthereducedamountof
20%whichispayablewhenthepaymentismadeduring
yourlifetime.Inthiscaseyourpersonalrepresentative-
whomanagesyourestatewhenyoudie–willhavetopay
afurther20%outofyourestatebasedonthevalueofthe
originaltransfer.
Calculating the IHT due on death
www.lonsdaleservices.co.uk 11
Paying the Inheritance Tax
IHTisnormallypayablesixmonthsaftertheendofthe
monthinwhichdeathoccurred.Incertaincircumstances
IHTcanbepaidininstalments.TheGrantofProbate
entitlingyourexecutorstoaccessanddistributeyour
propertycannotbeobtaineduntilafterallIHThas
beenpaid.
Case Study Example – IHT calculationJohndiedinMay2018leavinganestateworth£1,000,000whichallpassedtohischildren.Hisestateincludedthe
familyhomevaluedat£400,000.JohnwasawidowerandhiswifeBettyused50%ofherNRBonherdeathandnone
ofherresidenceNRB.BeforehisdeathJohnmadethefollowinggifts:
May 2005-£100,000eachtosonPeterandtodaughterFelicity=total£200,000;
July 2012-£300,000intoadiscretionarytrust;
June 2013-£100,000todaughterJo.
John’sIHTliabilityis:
John’snilratebandwillbehisownandhalfofBetty’s(£325,000x150%)£487,500.
Hewillhavearesidencenilratebandof(£125,000x2)£250,000.
Histotalnilratebandswillbe£737,500
TheMay 2005giftsarenotincludedwithintheestateastheyweremademorethansevenyearsbeforedeath.
TheJuly 2012 and June 2013giftsarebothwithintheincreasedNRBof£487,500 and use £400,000ofNRB
leavingNRBof£87,500touseagainsttheestate.Plusthereisaresidencenilratebandof£250,000.
Remainingnilratebandsavailabletouseagainsttheestate£87,500+£250,000=£337,500.
Totalestate£1,000,000
Remainingnilrateband(£737,500-£400,000)=£337,500
Taxableestate(£1,000,000-£337,500)=£662,500
IHTpayable:£662,500x40%=£265,000
12 Lonsdale Services Limited
Lonsdale Wealth Management Case Study
Current Situation
AllanRosshasbeenMr&MrsT’sfinancialadviserfor
fifteenyears.MrTis75andrecentlywidowed.Allan
organisedinheritancetaxplanningforthecoupleformany
years.Thisincludedsettingupa£49,000sumassured
seconddeathwholeoflifepolicyintrust,twodiscounted
gifttrustsnowoutsidetheestateworth£215,000,two
loantrustsworth£80,000.
MrT’soverridingfinancialprioritywastohaveenough
incomeinretirementandtocoveranylong-termcare
needsifnecessary.Hewantedtoundertakeestate
planningtoavoidpayinginheritancetaxondeath.Heisa
basicratetaxpayerwithmonthlyincomeof£2,000and
monthlyexpenditureof£1,500.Hehastotalinvestments
of£535,000andotherassetsworth£200,000.
MrT’shealthisadequate,heisnotconsidereda‘vulnerable
client’butAllanhadtomakehimcomfortableand
understandhisfinancialplanningoptions.
How Allan Ross, IFA Ware, added value with his independent financial advice
Understand the risk profile of your client and their financial objectives
Allandiscussedfuturefinancialcostsopenlyand
recommendedinvestingmorecashtoavoidinheritance
tax.MrThasagoodunderstandingofinvestment
andexperienceofinvestingacrossabroadrangeof
investments.Hehasamediumrisktoleranceanda
mediumcapacityforloss.
Use cash-flow planning tools to explain different scenarios
Allanusedcashflowplanningtoolstoplanfordifferent
eventualitiesandworstcasescenarios.Heexplainedthe
optionsforusingflexibleandtax-efficientinvestment
products.AsMrT’stwograndchildrenareimportant
tohimandhewantedtohelpthemfinanciallyAllan
recommendedleavingalegacyfortheireducationorhelp
themprogressintheircareer.
Allan recommended a Discretionary Trust Option
FollowingthemeetingAllanwasaskedtoresearcha
DiscretionaryTrustoptionandpreparedafinancial
planningreportforMrT’sgrandchildren’sGiftTrust.
Basedonthecash-flowmodelprepared,giftingof£50,000
wouldn’thaveanydetrimentalimpactonMrT’slifestyle,
evenifexpensivelong-termcarecostsarerequired.
Allan recommended Mr T involve his family in his inheritance tax planning decisions.
AllanrecommendedoneofMrT’stwodaughterswas
presentwhenarrangingtheTrustsoMrT’schildren
understoodhowitworks,asMrTmaynotbearoundto
implementit.MrTagreedtomakebothhisdaughters
trusteesalongsidehimself.
Allanworkedonthecasewithhisadministrators,Jo
RossandNatalieRispin.Natalieaddedacruciallayerof
expertiseandknowledgethatishardtoreplicatedealing
withsolicitorsandprobate,aswellasfillingoutformsand
understandingtheirlanguage.
Gifting to Grandchildren – Allan Ross, IFA, Ware
www.lonsdaleservices.co.uk 13
Allan recommended Mr T gift £50,000 in to a discretionary gift trust using a Prudential Offshore Unit Linked Capital Redemption Bond as it:
Providesaccesstotheagreedinvestmentstrategy,and
providespotentialforcapitalgrowth.
Makesuseofreliefsandallowancestominimisetaxpaid
Canbedividedinsegmentsforflexibilityandtax
efficiency.
Allowsthetrusteestocontrolthetaxpointanddefer
encashmentuntilamoretax-efficientpointintime.
Canbeheldunderatrusttoenablethetrusteesto
controlthefundswhilstassistingwithinheritancetax
mitigation.Investmentbondsaretechnicallyclassedas
non-incomeproducinginvestmentsnegatingtheneed
tocompleteregulartaxreturns,reducingtrustees’
administrativeresponsibilities.
Offshorebondsoffertaxplanningflexibility.The
trusteeschoosewhentotakeproceeds,andhow
besttotakethem,eg.whethertoassignsegmentsto
beneficiariespriortoencashment,byconsideringthe
possibletaxcharges.
Underlyingfundsgrowvirtuallyfreeofincomeand
capitalgainstax,providingpotentialforcapitalgrowth
throughgrossroll-upoverthemediumtolong-term.
Onlyexceptionisthewithholdingtaxondividendsthat
variesdependingontheunderlyinginvestmentsofthe
fundschosen.
Investmentshouldbeestablishedoncapital
redemptionbasissothebonddoesn’thaveanylives
assuredsothebonddoesnotendonanybody’sdeath,
offeringinvestmentandtaxplanningflexibility.
The Discretionary Trust from Prudential International was recommended as:
PrudentialInternationalareDublinbasedand
specialistoffshoreinvestmentarmofPrudentialGroup.
PrudentialholdaStandard&Poor’sA+(Stable)Long
termSeniorDebtRating.
Providerwasselectedinaccordancewithinvestment
propositionpreviouslydetailed.Prudentialprovides
excellentservicetoLonsdaleclientsandaccessto
agreedinvestmentstrategy.
Chargingstructureofthisinvestmentiscompetitive
Researchundertakenofthemarketplacehasidentified
thisasbeingthemostsuitablesolutionforMrT’sneeds
andobjectives.
Itispossibletoswitchunderlyingfundsofthis
investmentfreeofcharge.Noredemptionpenalty
appliedonearlyencashment.However,forthegiftinto
trusttobeeffectiveforIHTplanningpurposesMrT
mustn’tbeabletobenefitfromthetrust(orcausesgift
withreservationissues).
Thetrustees,ofwhichMrTisone,cancontrolwhen
thegrandchildrenreceivemoney.Thiscanoften
beachievedinataxeffectivemanner,byassigning
segmentstothebeneficiariesbeforeencashment.
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