Glasgow-based bespoke estate planning and portfolio management company CFG Wealth Management has issued a timely reminder that the deadline for changing beneficiaries within an interest in possession (IIP) trust is only one month away. These trusts were used for many years in conjunction with single premium life assurance bonds, usually in the form of Gift & Loan Plans or Discounted Gift Trusts.
Major changes to the inheritance tax (IHT) treatment of most trusts were introduced in the 2006 budget. These also had an impact on existing Accumulation & Maintenance (A&M) trusts that were already in force on budget day, 22nd March, but trustees were given a transitional period until 6th April 2008 to allow them the opportunity to make changes to minimise or eliminate the effect of the changes.
Existing IIP trusts were ring-fenced from the changes, provided that no changes of beneficiary entitled to an interest in possession were made on or after 6th April 2008. Although this date has now passed, Alistair Darling announced changes in this year’s budget that mean that trustees of IIP trusts now have a second chance to take advantage of this opportunity.
Karen Reid, Associate Director of CFG Wealth Management, said, “Most IFAs and many solicitors will have set up IIP Trusts prior to 22nd March 2006 and some may be unaware that changes to beneficiaries after 6th October 2008 will cause the trust to fall within the Relevant Property regime (Discretionary Trust rules), which potentially means unforeseen tax bills particularly for larger trusts.
“Even those IFAs and solicitors who are aware of the deadline will not necessarily be aware that leaving the ‘removed beneficiary’ as a potential beneficiary could cause a Gift With Reservation.
“Clients with trusts holding life assurance policies or investment bonds should review their objectives in light of any changes of circumstances since the trusts were created so that any need to change beneficiaries can be dealt with before 6th October 2008. And even for relatively modest trusts, care should still be taken to ensure that inadvertent gifts with reservation are not created as, otherwise, the beneficiaries who originally had the IIP could have an IHT burden for years to come.
CFG Wealth Management is a trading division of The Carruth Financial Group which has provided investment and tax planning services to private investors and their businesses for over 20 years. Implementation of ‘managed risk’ investment strategies using tax efficient vehicles is at the heart of its business philosophy.
For further information please contact Karen Reid at CFG Wealth Management on tel 0141 249 6890
Issued on behalf of CFG Wealth Management by Liquorice Media tel 0141 564 8058
Date 5th September 08