Wealth or life interest trust

weezie7

I have had initial meeting with an IFA to sort out what to do with my pensions. Now underway.


In discussing finances a different issue came up, when trying to be tax efficient, about some sort of Bond or Trust (don't recall which) in which £ is invested (in a Bond/Trust), I can take an income, plus also after 7 years, £ would be outside the IHT bracket, if I died. Also something about 20% each year being outside tax for IHT?


Does anyone know what sort of Bond/Trust it is likely to be?

Any thoughts on it?


I realise this is a bit vague, but it was just discussion at this point.


Many thanks

xylophone

This sounds like a life assurance bond.

http://www.pru.co.uk/investments/bonds/what_is_an_investment_bond/

http://www.taxation.co.uk/taxation/Articles/2014/01/08/318431/bond-we-trust

TH1878

weezie7 wrote: »

I have had initial meeting with an IFA to sort out what to do with my pensions. Now underway.


In discussing finances a different issue came up, when trying to be tax efficient, about some sort of Bond or Trust (don't recall which) in which £ is invested (in a Bond/Trust), I can take an income, plus also after 7 years, £ would be outside the IHT bracket, if I died. Also something about 20% each year being outside tax for IHT?


Does anyone know what sort of Bond/Trust it is likely to be?

Any thoughts on it?


I realise this is a bit vague, but it was just discussion at this point.


Many thanks

Doesn't fit exactly with what you're saying but was it a Discounted Gift Trust?

weezie7

Hi, thanks to both for replies, I think it may be the latter, Discounted Gift Trust.


Any thoughts?

xylophone

It's an insurance bond held in trust as here

https://www.pruadviser.co.uk/new_pdf_folder/IHTB10039.PDF

TH1878

weezie7 wrote: »

Hi, thanks to both for replies, I think it may be the latter, Discounted Gift Trust.


Any thoughts?

A discounted gift trust is usually (not always) used in conjunction with an investment bond (onshore or offshore). The bond is put into trust but you elect for the trustees to pay you withdrawals from the bond (usually up to 5% pa) for the rest of your life.

A calculation is then made as to how many withdrawals you will receive based on your life expectancy (which can be assessed in a number of ways) - this is the discount amount, the bit of the trust that is carved out for your own use during your lifetime.

This discount amount is out of your estate immediately and the remainder usually falls out after 7 years (but can be up to 14 years if you've made previous gifts).

What do you want to know about it?