I thought I would recycle an article I wrote a year or so ago. The reason for doing so is the subject provides an answer to the loss of Accumulation and Maintenance Trusts, whereby money is gifted to minors but which they cannot access until mature enough to manage it.
In other words, the parent or grandparent keeps control of the purse strings whilst taking effective steps a reduce their IHT bill.
So far this solution is proving popular in London and other parts of the UK. However, it is yet to gain traction in the North East. Consequently, I thought a reminder appropriate.
“In an effort to make financial issues a little more entertaining, I will now encourage you to drift off into a fantasy world from long, long ago.
“Luke Skywalker, C-P3O and R2-D2 are taking a break from filming the next Star Wars film which has the working title “Gordon Brown stole my trusts.”
Luke chirps up “It is a real shame that Gordon Brown made Discretionary Trusts and Accumulation and Maintenance trusts almost redundant back in 2006.”
“I agree.” C-P3O becomes quite animated. “The ability to make a gift and have it fall out of your estate for Inheritance Tax purposes, whilst maintaining some control, was most useful. There is nothing quite like them available anymore.”
R2-D2 whistles. The other two look at him askance. C-P3O pipes up “You are a silly little droid. I think your circuits must have fused. How can you still get the same benefits even now?”
There is a lot more whistling and some spinning. C-P3O strikes several poses. Luke Skywalker’s jaw slowly drops.
Luke asks, “So what you are saying is that an individual can place a sizeable sum into an investment and even if that is over the Nil Rate Band, it will fall out of that person’s estate after seven years? And yet they can still control who gets what and when just like the old trusts?”
A whistled “Yes” follows.
“Tell me more as my dad, Darth Vader, wanted to leave me a couple of planets but reckoned that they were too valuable and he didn’t fancy the tax at the lifetime IHT rate. He also thinks I am a bit immature to own them outright.”
R2-D2 whistles and spins for a good five minutes as he explains it is possible to gift money and to control access by using a life insurance investment bond. In basic terms, it is a contract between two parties and as such can alter and amend its terms and conditions.
Luke and C-P3O were impressed and the robot patted the droid on the head saying, “I do apologise if I was a little rude earlier. You have surprised me and Master Luke. I think his father would like to discuss this with you.” At this point there was a wheezing sound.
The droid shivered and started spinning, looking for an exit. Fortunately, it turned out to be a broken winded Wookie wandering off set and lighting a cigarette. ”
I apologise to both Star War fans and non-Star War fans for this parody. However, I hope that the message has come across. It is perfectly feasible to replicate the advantages of both Discretionary Trusts and Accumulation and Maintenance Trusts without creating a charge to Lifetime Gift IHT, regardless of the size of gift.
We have a copy of the legal opinion that supports this proposition, available upon request.
May the Force be with you.”