Deed of Assignment - Reassure Bonds

Tigga213

Hi,

We have been advised by my IFA to deal with my fathers Will Trust, of which my mother, sister and I are the Trustees and discretionary beneficiaries. The IFA has advised that we need to provide a Deed of Assigment to Reassure, who hold the bonds. There are two bonds in the Trust. My mother is the life assured but the bonds will be shared equally between my sister and I. My mother no longer needs the funds and the IFA has said that this is the best thing to do re tax efficency. We have obtained quotes to get the Deed done but these are eyewatering and we are hoping to do this ourselves, using the Deed of Assignment Template form freely provided by Aviva as a model - search on Google and it comes up, sorry i am not able to post the link.

We are in the process of filling in the form and have a few questions:

1. Do we need to fill in separate forms for the two bonds?
2. The advice on the Aviva form mentions having to possibly fill in another form "Power of Appointment of Beneficiary", how do we know if we need to do this? The IFA made no mention of it.
3. Question 3 - we have ticked "by the Trustee of a Trust in favour of the beneficiary" - is this correct in our circumstances?
4. The IFA mentioned that we would need to advise Reassure specifically how the bonds would be assigned by detailing which numbered segments in the bonds would go to each beneficiary. There is no space on the form for this information. Will Reassure ask for this subsequently?

We would be really grateful for any advise that can be given.

Thanks and sorry if this is under the wrong category.

Tigga213

poseidon1

OP, since this discretionary trust was specifically established under the terms of your fathers Will, you will need a bespoke drafted Deed of Appointment which excercises the trustees' express powers under the terms of you father's Will to appoint the bonds out of the trust in favour of you and your sister. No point looking to Reassure or any other life company for a template for this deed, since life company templates in this instance, only address policy trusts they originally sold and not those created by a client' s own lawyers.

Incidentally were the bonds the only asset of the discretionary trust, and if so will assigning them as planned leave the trust empty with no other assets? I hope the answer is yes, since keeping the trust with reduced ongoing assets may not be the best of ideas.

Turning now to the deed of assignment , Reassure does have their own as you will see attached.

https://www.reassure.co.uk/uploads/RTP034-Deed-to-assign-policies-from-trustees-to-a-beneficiary.pdf

You will see Reassure's assignment provides space identifying the segments of the policy to be assigned to a beneficiary but you will need individual assigments for each beneficary.

It would not hurt to also expressly identify the policy segments being appointed to each beneficiary in the Deed of appointment, and supply a copy of that deed to Reassure to accompany the assignment deeds ( 'belt and braces').

However given the circumstances, you have no other option than to get a solicitor to prepare the Appointment deed.

In passing, did your father's will establish a Nil Rate Band discretionary trust? I would advise these fell completely out of fashion in 2007 when the transferable nil rate band was introduced for spouses and civil partners. Did your father's will pre date 2007 and was never subsequently updated?

One last point, I assume this transfer of assets out of the discretionary trust is within 2 years of your father's death, and as indicated above will terminate the trust at the same time?

Tigga213

Thanks so much for the information sent. Noted re the Deed of Appointment (DAp). Yes, the bonds were the only assets in the Trust. Thanks for the link to the Reassure Deed of Assignment (DAs). Can I double check, that in order to carry out our wishes (to assign the bonds to my sister and I, rather than to the Trust), we will need to send Reassure both the DAs and the DAp?

My fathers Will was dated March 1999 and he died in November 2000. The Will states that "I give the nil rate band legacy to the Trustees to hold upon the following Trusts" - does that answer your question, if not what should I be looking for? To be honest, I assume that by assigning the bonds to my sister and I, leaving nothing in the Trust, that will in effect terminate the Trust, but I am not sure? Once the process has been completed we plan to encash the bonds. Thanks again for your help.

poseidon1

Ok, as anticipated a very old Will and equally longstanding trust arising therefrom.

Since the Deed of appointment does require bespoke drafting by a lawyer in accordance with the express trust powers granted to the trustees under the Will, you may as well get the lawyer to combine both Appointment and Assignment in a single document called a Deed of Appointment and Assignment.

This then means a single lawyer drafted document which simultaneously legally terminates the trust and gives Reassure precise instructions for the assignment of bond segments to you and your sister without the necessity of completing Reassure's pro forma document x 2.

Now there may be some HMRC compliance requirements to review prior to the trust termination, which in all likelihood has never been mentioned to you before.

Firstly, the value of the bond needed to be below a certain value on your your father's death (and in subsequent years) to avoid being reported to the IHT department of HMRC. Therefore confirm the following:

1. The bond on your fathers death was valued substantially below £187,000 ( ie 80% of the 2000/2001 nil rate band).
2. For each successive 10 year anniversary of the trust in 2010 and 2020 the bond values remained firmly below the prevailing nil rate bands in those years, even after you add back any 5% bond withdrawals your mother may have taken in the intervening years. As of now hopefully, the bond value is below £260k ( allowing for withdrawals in the past).

If you can give assurances regarding 1) and 2) above there is no outstanding IHT compliance to worry about leading up to the trust termination.

What you may not be able to avoid if it has never been done in tne past, is HMRC's Trust registration for anti money laundering purposes. This was first introduced in 2017 for trusts with taxable assets, which would have applied in your case.

The problem you may face is Reaasure requiring proof the trust had been registered, prior to actioning your request for the assignment of the bonds.

Information on the online process for registration below -

https://www.gov.uk/guidance/register-a-trust-as-a-trustee

As you can see from all of the above, there was potential for a fair amount of discretionary trust compliance and administration over the last 25 years, and if there has been no knowledgeable professional guidance along the way, there can be certain pitfalls for the unwary trustees.

Tigga213

Thanks so much again for your advice and help.