Standard Life is warning investors that certain types of trust have just one year remaining for chan...
Standard Life is warning investors that certain types of trust have just one year remaining for changes to be made.
Julie Hutchison, estate planning specialist at Standard Life Assurance, pointed out that last year’s Budget introduced significant changes to the IHT treatment of gifts to certain trusts. The two main types of trust affected were interest in possession trusts (IIP) and accumulation and maintenance trusts (A&M).
“To allow the trustees of those trusts some time to consider their options, a two year transitional period was created which expires on 5 April 2008,” she said.
“The transitional rules are very different for IIP and A&M trusts.” There is one year left for IIP trustees to consider who is to be the named beneficiary.
“The great opportunity is for trusts where the trust interest can now be passed down to the next generation,” Hutchison said.
“This would be ideal where the existing IIP beneficiary has no requirement for the trust assets and wants their children to benefit instead. Taking action to change the beneficiaries before 5 April next year means the trust will not be brought into the new regime.”
The new regime could involve 10 yearly charges and exit charges for IHT. All gifts to flexible trusts since 22 March 2006 have fallen under this more complex IHT regime, Hutchison said.
A&M trusts were more heavily affected by last year’s Budget changes since, if they are not altered in a certain way prior to next April, the new regime will apply from 6 April 2008 onwards.
“A&M trusts were normally bespoke trusts written by a law firm and were not mainstream trusts for life offices to offer,” Hutchison said.
“However, trustees of A&M trusts should keep their eye on the calendar as they only have one year left to consider whether to alter the capital vesting age of the beneficiaries.”