enhancement made to ensure advisers have flexibility to meet client needs
Skandia International has launched two new versions of its Discounted Gift Trust (DGT) scheme through Royal Skandia, its Isle of Man-based business. The trusts include a bare version and a discretionary option.
The trusts have been added to support Skandia International's range of offshore investment bonds available in the UK following the Finance Act 2006. The aim is to ensure advisers have the flexibility to meet their clients' individual financial planning needs.
DGTs enable a client to immediately reduce their liability to inheritance tax (IHT), while still retaining a right to withdrawals from the investment.
For IHT purposes, the gift is less than the overall value of the bond, because it is discounted by the value of the client's right to receive regular withdrawals.
The value of the discount is based on the client's sex, age, health and level of withdrawals chosen and is immediately outside the estate for IHT purposes, as is any future investment growth.
Advisers can recommend either the new bare or discretionary trust depending on the client's needs.
The key benefit of the bare version is the gift is treated as a potentially exempt transfer (Pet) and therefore avoids the recent changes to trusts and IHT.
If selecting this option, the client must name specific individuals at the outset, which cannot be changed, and there will be no IHT liability as long as they live for seven years after making the gift. Care should be taken where the beneficiaries are minors.
For clients who require more flexibility, the discretionary trust allows the client to nominate a particular class of individuals, such as "all my children, born and unborn", and the trustees have the flexibility to add to the class in the future.
Because the gift is treated for tax purposes as a chargeable lifetime transfer (CLT), it is subject to entry, exit and periodic charges, in line with the IHT treatment of gifts into trust since the 2006 Budget.
Colin Jelley, head of tax and financial planning at Skandia, said: "Skandia International's trust range offers advisers true flexibility so that the needs of individual clients in the UK can be met without resorting to a one-size-fits-all style of financial planning." key points
Skandia launches two versions of its Discounted Gift Trust
Bare and discretionary options available
Range aims to offer flexibility
Caring for children and elderly relatives
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