Estate Prteservation Acoount - One fir the IFA's

Mothman

In 1999 my Mother put an amount into an Estate Preservation Account through what is now Canada Life International (CLI). From what I can tell this product appears to be an Offshore Investment bond whereby the underlying segments are written as individual endowment policies, all held within an interest in possession trust. The product allows for my mother to take income from the bond as the individual endowment policies mature, these having staggered maturity dates. However she has never done this and has always chosen to extend the maturity of each segment when due.
My brother and I who are the trust beneficiaries recently paid for independent financial advice on the product and the IFA’s conclusion was that the original investment & subsequent growth would not be protected from IHT as HMRC would consider it to still form part of her estate due to her retained interest i.e. her ability to take income even though this has never been done.
Suitably alarmed we then put the IFA‘s opinion to CLI who have wholly refuted it and said that in their opinion the product was tried & tested and had been unchallenged for over 25 years. The IFA has since admitted that he did not contact CLI regarding the product prior to offering his advice and so we are now having doubts about who to believe.

Sorry for the long preface but I just wondered if any of the IFA’s here could say whether products such as this are known to have been widely sold and whether they were aware of their effectiveness in protecting from IHT being called into question.

Malthusian

Mothman wrote: »

Suitably alarmed we then put the IFA‘s opinion to CLI who have wholly refuted it

If they've wholly refuted it, i.e. proven beyond doubt that it is wrong, I'm not sure why you're concerned. Maybe you mean they've disagreed with it. [/pedantry]

and said that in their opinion the product was tried & tested and had been unchallenged for over 25 years.

How can it be tried and tested and unchallenged?

Either HMRC has challenged such a scheme in court and lost, which means it's been tried and tested, or they haven't challenged it yet.

The fact that HMRC has not yet challenged something does not mean they won't. Google film partnerships, among others.

If they've been selling these schemes for 25 years it is highly likely that not many people have yet died with such a scheme in place, and that HMRC has not yet got around to challenging the potential unpaid Inheritance Tax liability.

The IFA has since admitted that he did not contact CLI regarding the product prior to offering his advice and so we are now having doubts about who to believe.

I'm not surprised he didn't ask Canada Life for their opinion, as the legal principle of diceret non diceret applies ("he would say that, wouldn't he").

In the absence of HMRC challenging the Inheritance Tax calculation of someone who had the same kind of arrangement, and losing, the only way to find out who is right, Canada Life or your IFA, is to wait until your mother dies, not include the bond in the Inheritance Tax calculation, then wait and see if HMRC fine you.

xylophone

You have looked at all this?

http://documents.canadalife.co.uk/external-legal-advice-on-the-wealth-preservation-trust-account.pdf

http://documents.canadalife.co.uk/wealth-preservation-trust-it-ticks-more-boxes.pdf

https://www.canadalife.co.uk/estate-planning/wealth-preservation-account


https://www.canadalife.co.uk/adviser/ican-academy/briefing-notes/taxation-of-investment-bond-in-trust-briefing-note-canada-life

Mothman

Malthusian many thanks for your reply

Malthusian wrote: »

If they've wholly refuted it, i.e. proven beyond doubt that it is wrong, I'm not sure why you're concerned. Maybe you mean they've disagreed with it. [/pedantry]

Apologies for the poor terminology, I concur ' disagreed' would have been more appropriate

Malthusian wrote: »

How can it be tried and tested and unchallenged?

Can't comment as this phrase was lifted directly from a CLI email

Malthusian wrote: »

If they've been selling these schemes for 25 years it is highly likely that not many people have yet died with such a scheme in place, and that HMRC has not yet got around to challenging the potential unpaid Inheritance Tax liability.

In the absence of HMRC challenging the Inheritance Tax calculation of someone who had the same kind of arrangement, and losing, the only way to find out who is right, Canada Life or your IFA, is to wait until your mother dies, not include the bond in the Inheritance Tax calculation, then wait and see if HMRC fine you.

Yes I guess we will have to wait to see if other such arrangements become challenged, though if this happens she may be too old by then to consider any PET alternatives. Our intention is not to withold any details of her finacial affairs and to make a full declaration to HMRC when the time comes.

Mothman

xylophone wrote: »

You have looked at all this?

http://documents.canadalife.co.uk/external-legal-advice-on-the-wealth-preservation-trust-account.pdf

http://documents.canadalife.co.uk/wealth-preservation-trust-it-ticks-more-boxes.pdf

https://www.canadalife.co.uk/estate-planning/wealth-preservation-account


https://www.canadalife.co.uk/adviser/ican-academy/briefing-notes/taxation-of-investment-bond-in-trust-briefing-note-canada-life

Thanks for the input. Luckily we still have the original product literarature but as this is a legacy solution the product gets little mention on the CLI website, though we have previously downloaded any info we can find.

For clarity I should mention that most of those links relate to to the 'Wealth Preservation Account' which is a subsequent product from around 2006 which has a different structure to what my mother has which is the 'Estate Preservation Account' and so the same rules may not apply.

Mothman

Just as as an update, an internet search did reveal the document in the below link which I had not previously found. Seems to suggest that CLI are not aware of any challenges by HMRC rather than a definitive yay or nay, I guess time will tell.

http://documents.canadalife.co.uk/wealth-preservation-account-claims-experience.pdf

As an aside can anyone advise how I correct my spelling mistakes in the thread title as the edit post facitiliy wont let me do this.

Malthusian

Mothman wrote: »

Yes I guess we will have to wait to see if other such arrangements become challenged, though if this happens she may be too old by then to consider any PET alternatives.

This is crucial. Unless she is in poor health and unlikely to survive 7 years or 2 years (7 years allows planning using PETs, 2 years allows investments eligible for Business Property Relief, which are tried and tested) I would be considering other planning options.

For example, instead of rolling over the endowment policies, she could take the maturity proceeds and give them to her heirs, which would be free of Inheritance Tax provided she survived seven years. (Arguably it could even be considered a gift out of regular income, given the maturity proceeds are paid out on a regular basis, but that's not something on which you should take the word of a random person on the Internet.)