Capital Investment Bond held in trust 24 June 2022 at 2:46PM in Deaths, funerals & probate 3 replies 155 views

retroman62

My father created a Capital Investment Bond held in trust between him, my brother and myself, and payable only on his death. My father hasn’t yet passed away, but it is imminent, and I’m trying to get things lined up for probate purposes. Having spoken to the policy provider, I am advised that there would be a chargeable gain (of around £20K).
What I would like to understand is what is the process for probate and IHT - the adviser from the policy provider advised that the tax liability would fall upon my brother and myself (who are both by the way also the beneficiaries under my fathers will). Is our liability either for Trustee tax (at 25%?) or for income tax (if higher than basic rate). Also once such tax has been paid, is the remainder liable for IHT, or is the fact that it is held in trust make it outwith IHT?

My father also has a number of other equity based investments, and I’d like to understand more widely which tax comes first - the capital gains tax or the IHT.

Would be really grateful for advice, as it’s not an area I know much about. 

Keep_pedalling

Sounds like bond falls outside the estate.

CGT will not apply to his estate as death wipes out all his gains for CGT purposes. 

Whether IHT applies depends on the value of his estate value of any house he owned and his marital status. A widower can leave up to £1M tax free if they inherited everything from their spouse.

Marcon

retroman62 said:

My father created a Capital Investment Bond held in trust between him, my brother and myself, and payable only on his death. My father hasn’t yet passed away, but it is imminent, and I’m trying to get things lined up for probate purposes. Having spoken to the policy provider, I am advised that there would be a chargeable gain (of around £20K).
What I would like to understand is what is the process for probate and IHT - the adviser from the policy provider advised that the tax liability would fall upon my brother and myself (who are both by the way also the beneficiaries under my fathers will). Is our liability either for Trustee tax (at 25%?) or for income tax (if higher than basic rate). Also once such tax has been paid, is the remainder liable for IHT, or is the fact that it is held in trust make it outwith IHT?

My father also has a number of other equity based investments, and I’d like to understand more widely which tax comes first - the capital gains tax or the IHT.

Would be really grateful for advice, as it’s not an area I know much about. 

This may be useful reading: https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/taxation-uk-investment-bonds?utm_source=legacyurls&utm_medium=301&utm_campaign=/knowledge-literature/knowledge-library/taxation-uk-investment-bonds/

retroman62

Thanks Macron. I had seen this article previously, and was confused because it is unclear to me whether, in this capacity, I would be a “trustee” or a “personal representative”. I am both, but the tax treatment of the two appear to be different.
Keep_pedalling, my father’s estate will exceed the £1m tax free.