Investment Bonds and Trusts for IHT planning

Bostonerimus1

With the changes to how DC pensions are treated for IHT purposes and the growth in house prices and stock markets more people/estates will be facing an IHT bill. So maybe people will discuss the pros and cons of onshore investment bonds/life insurance and the range of trusts that can be used as wrappers.

poseidon1

You will find very few fans of trust arrangements on MSE forum, whether or not they utilise investment bonds as the trust asset.

Investment bond based trusts were perhaps oversold by the financial services industry 25--30 years ago, and with the loss of the life company technicians able to provide support and advice to the clients and their families, we are seeing queries on investment bond tax and related trust termination issues , arising from time to time on the various MSE forums.

That said, with the emergence of the mass affluent whose properties and now DC pensions wealth are exposing their estates to appreciable IHT exposure, investment bond trusts will no doubt re-emerge as part of the armoury available to Financial Planners to address the rising problem.

In that regard life company Discounted Gift Schemes, together with gift and loan plans, will be high on the agenda of products offered to clients with appropriate levels of liquid wealth.

Aberdeen Investment Management provide pretty decent guides, covering both these options as set out below -

https://techzone.aberdeenadviser.com/public/iht-est-plan/Tech-guide-discounted-gift

https://techzone.aberdeenadviser.com/public/iht-est-plan/Tech-guide-loan-trusts

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81869508#Comment_81869508

Thanks for the links

I've always been dubious about life insurance wrappers for investments with their added layers of fees and management. Then wrapping it in one of the many flavours of trusts is another complication with the different tax treatments.

I can imagine many estate values being over 1M and circumstances like the deceased being childless and unable to get the home IHT allowance will produce some pretty big IHT bills. I'm also interested in the pros and cons of someone buying an annuity and also gifting over 7 years relative to a DGT strategy.