Scottish Life International is to launch a bare trust at the end of November, following changes affe...
Scottish Life International is to launch a bare trust at the end of November, following changes affecting trusts introduced in the Budget earlier this year. Meanwhile, Prudential International has also announced its intention to launch three trusts.
The Bare Trust, is a substitute for probate trusts, which were made ineffective following the Finance Act 2006, said Gerry Brown, technical manager at Scottish Life International.
He said: "The Finance Act 2006 deemed that the establishment of a probate trust was a chargeable lifetime transfer for inheritance tax (IHT) purposes.
"It was brought within the relevant property regime, despite the fact that the probate trust was not used as an IHT avoidance tool.
"Under the terms of probate trust, the settlor was the primary beneficiary, and thus the trust fund (ie, the bond) was in his/her estate for IHT purposes."
Brown said that, faced with this irrational and unjust IHT charge, most life offices withdrew probate trusts where the settlor was either UK domiciled or deemed UK domiciled.
It is still appropriate to use the probate trust where the settlor is domiciled outside the UK. Bare trusts are outside the IHT relevant property regime and thus a trust that qualified as a bare trust could be used for probate avoidance purposes.
At the same time, Prudential International has also indicated it will launch three discretionary trusts. In coming weeks, the group will launch a Discretionary Discounted Gift Trust (DGT), Discounted Loan and Discretionary Gift Trust. The Pru already offers absolute versions of these three trusts, but will offer the discretionary versions to add flexibility.
Scottish Life International and Prudential International launch new trusts
The move is in response to Finance Act 2006
The moves aim to provide IHT planning solutions
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