Why use a trust in conjunction with an offshore bond?
There are various reasons why you might wish to place your offshore bond into a trust.
The most common reasons are explained below.
To avoid Manx Probate
Policies issued by RL360° are classed as Manx assets and Manx Probate will therefore be required on the death of the policyholder (s) before either proceeds can be paid out or the policy is re-registered into the name of the new owner. By placing a RL360° offshore bond in trust, you avoid the need to obtain Isle of Man Probate upon death of the policyholder(s) as the policy is owned by the trustees. More information about Manx Probate can be found at the Isle of Man Courts of Justice website at http://www.courts.im/courtprocedures/willsandprobate
To control family assets (Succession Planning)
Trusts can offer advantages over outright gifts since the Donor can exercise a degree of control over their assets once they have been given away. If the bond is written in a flexible trust, the trustees can be instructed to hold the bond until the beneficiaries reach a certain age or for future children or grandchildren.
Inheritance Tax planning for UK domiciled individuals
For individuals who are domiciled or deemed domiciled in the UK, Inheritance Tax (IHT) applies to their worldwide assets and therefore includes offshore investments. Placing an offshore bond under certain trusts can enable some or all of the proceeds from the bond to fall outside of the Settlor's estate for Inheritance Tax purposes. Under our “Toolkit” menu, we have an Inheritance Tax Calculator where you can enter your client’s asset details and calculate the potential Inheritance Tax implications.
Inheritance Tax planning for non-UK domiciled individuals
An individual who has been a long term resident of the UK for Income Tax purposes but is not UK domiciled or deemed UK domiciled could consider placing their offshore bond in an Excluded Property Trust. This can avoid the value of the bond being taken into account for Inheritance Tax valuation purposes even if the individual does eventually become UK domiciled.
The UK tax information set out in this section is based on RL360°’s understanding of the general and current application of Her Majesty’s Revenue and Customs (HMRC) practice as at August 2012. The contents of these web pages and any trust wording provided by us should not be used as the basis of advice given to individual clients without independent legal advice being sought. RL360° cannot be held responsible for any actions taken or refrained from being taken by individuals as a result of the information provided in this guide.