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Investment Bonds and Trusts

Investment bonds are favoured vehicles for Trustee Investments because they can be placed into trust. This can serve a number of purposes, such as:

  • Inheritance tax planning.
  • Administrating an Estate on behalf of a vulnerable individual, such as a child or a disabled person.
  • Executing the instructions from a will or implementing a statutory trust if the deceased died without writing a will.
  • Preventing access to capital and/ or income from beneficiaries because of concerns about their financial maturity or the financial consequences following the possibility of a beneficiary having a future divorce.

There is a wide choice of options available for combining Investment Bonds and Trusts. If a new trust needs to be created there is a menu of different types of trust. The decision as to which is the most suitable depends on the need for future capital and income. The main “off the shelf” trusts available from the investment bond providers can be summarised in the table below:

If you are UK Domiciled

  1. Want to avoid future inheritance tax and either:
  • Need access to capital and/or income and either:

-is willing to gift some or all of the investment bond and either:

-Need future access to capital

-A Lifestyle Trust may be appropriate

-Or need a fixed future income and either:

-Want to be able to change the future beneficiaries

-A Discounted Gift Trust on a “Discretionary” basis

-Or does not need to change the future beneficiaries

-A Discounted Gift Trust on an “Absolute” basis

-is not willing to gift some or all of the investment bond and either:

-Wants to be able to change the beneficiaries in the future

-A Loan Trust written on a “Discretionary” basis

-Or does not need to change the future beneficiaries in the future

-A Loan Trust written on an “Absolute” basis

  • Or does not need access to capital and/or income and either:

-is willing to gift some or all of the investment bond and either:

-Wants to be able to change the beneficiaries in the future

-A Discretionary Trust written on a “Settlor Excluded” basis

-Does not need to change the future beneficiaries in the future

-An Absolute Trust

-is not willing to gift some or all of the investment bond and either:

-wants to make a payment to their beneficiaries as compensation for inheritance tax due and either:

-Wants to be able to change the beneficiaries in the future

-A protection policy written on a discretionary, “settlor excluded” basis

-Or does not need to change the future beneficiaries in the future

-A protection policy written on an “Absolute” basis

  1. Does not want to avoid future inheritance tax and either:

-Wants to give assets away and either:

-Wants to be able to change the beneficiaries in the future

-A Discretionary Trust written on a “Settlor Excluded” basis

-Or does not need to change the future beneficiaries in the future

-An Absolute Trust

-Or does not want to give assets away and either:

-Wants to avoid possible delays from probate

-A Discretionary Trust written on a “Settlor included” basis

-Or does not want to avoid possible delays from probate

-It may not be necessary to write a trust.

If you are non UK domiciled  

-Either want to give assets away:

-A Discretionary Trust written on a “Settlor Included” basis

-Or does not want to give assets away and either:

-Wants to avoid possible delays from probate

-A Discretionary Trust written on a “Settlor Included” basis

-Or does not want to avoid possible delays from probate

-It may not be necessary to write a trust.