first life companies relaunch trust ranges prior to passing of july finance act
Axa Isle of Man and Canada Life International (CLI) are the first life companies to relaunch their inheritance tax (IHT) planning offering, despite many urging caution until the Finance Act is passed in July.
Axa and CLI have added absolute/bare and discretionary trusts to their ranges. However, both said they would keep clients informed if there were any further changes to legislation.
An absolute/bare trust gives the client no flexibility in changing beneficiaries, while a discretionary trust enables individuals to place a lump-sum for their dependants into a discounted gift trust.
The move comes after the Chancellor of the Exchequer, Gordon Brown, announced in the Budget that accumulation and maintenance (A&M) and interest in possession (IIP) trusts would attract a 20% IHT charge on the excess of transfers into a trust, which exceed the nil-rate band of £285,000 in the 2006/07 tax year. In addition, a trust established for more than 10 years would face a 6% IHT charge.
Both A&M and IIP trusts were popular for people planning for retirement or looking to pass down gifts to their children in a flexible manner.
Graeme Easton, technical director at Axa Isle of Man, said: "Following the Budget announcement, we felt it was important to address any uncertainty created among individuals and intermediaries and ensure IHT planning was not being put on hold, due to a lack of clarity about the most tax efficient ways to invest. While we are still lobbying for changes to be made prior to the Finance Bill being enacted, we believe certain parts are unlikely to change so we have written these trusts on that basis."
Although Standard Life has re-launched its absolute and flexible trust plans, it said it was too early to relaunch its Discounted Gift Plan (DGP) until formal clarification was given on how trusts would be valued in the Finance Act.
Skandia, Prudential International and Scottish Equitable International (SEI) have also put on hold changes to their trust ranges. Paul Kennedy, taxation and trust manager at Prudential, said the Finance Bill had not made the proposals in the Budget any clearer and advisers should do nothing until the Finance Act was passed later in the year.
SEI said it was not taking on new business where transfers were above the IHT nil-rate band, and was now asking clients to sign a disclaimer showing they have understood the product and are aware there could be changes to it in the future as a result of Government regulation. However, the group has withdrawn its packaged product, which used a discounted gift trust.
Colin Jelley, head of tax and financial planning at Skandia, said: "The legislation contained in the Finance Bill has not yet received Royal Assent and therefore it is not law. While the Government will not widen the scope of the provisions, there may be changes to the legislation and advisers need to think twice about committing to an arrangement that does not give their clients all the benefits they really want."
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