Estate Planning Guide

120 CASE STUDIES 121 APPENDIX About the provider WAY Investment Services Ltd is a provider of reversionary interest trust based IHT mitigation solutions. Following extensive consultation with expert tax and legal advisers, WAY launched the first collectives based (therefore CGT assessable) IHT mitigation plan, the WAY Flexible Inheritor Plan, in 2003. WAY also has a detailed, plan specific, correspondence with the Capital Taxes Office of HMRC confirming the efficacy of its Inheritor Plans. WAY continues to be at the forefront of estate planning and product development, having forged alliances with a number of fund platforms and discretionary investment managers to enable advisers to recommend the most appropriate investment solution for their clients. To support clients, WAY Tax & Trustee Advisory Services Ltd, typically, acts as the Professional Trustee, to the range of WAY Inheritor Plans and also for external trusts. Our Estate Planning Solutions The WAY Inheritor Plans come in various forms which may be used individually or in combination. All investments are gifted into a flexible reversionary interest in possession trust for the benefit of the chosen beneficiaries. Those investments are collectives making use of the CGT allowances for both trustees and beneficiaries. The WAY Flexible Inheritor Plan. Suitable for investors who wish to make a significant gift, typically up to the nil rate band, to reduce their IHT liability. They may also want access to the capital at a later date if their circumstances subsequently change. The WAY Gifts from Income Inheritor Plan. Appropriate for investors who wish to make gifts out of surplus income each year and take advantage of the ‘normal expenditure out of income’ inheritance tax exemption but also want a solution that can adjust to changing personal/ family circumstances. The WAY Inheritor Loan Plan. Pertinent for investors who wish to carry out inheritance tax planning but cannot afford, or are unwilling, to give up immediate access to the capital. However, they are prepared for future investment growth to be given away. The investor makes an interest free, repayable on demand, loan to the trustees of a flexible interest in possession trust. The WAY Duo Inheritor Plan. Attractive to investors who wish to make a significant gift, who require the certainty of an ‘income’ for the short term only but would like potential access to further capital should their circumstances change in the future. www.wayinvestments.co.uk FLEXIBLE REVERSIONS PAID TO THE SETTLOR AT THE TRUSTEE’S DISCRETION Appendix Glossary Annuity: a financial product that, in exchange for a fixed payment, pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees. Bare Trust : a basic trust in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets. Capital Protection Lump Sum: an option that returns a lump sum if the pension holder dies without having received the full value of their pension fund. Capped Drawdown Pension: arrangements, with withdrawal limits defined by HMRC, that are intended to provide some security that the level of withdrawals taken from a Drawdown Pension is affordable and will not cause the pensioner to have to fall back on the State. Flexi-Access Drawdown Pension: arrangements that remove any limit on the amount which can be withdrawn from a pension scheme in any tax year. Chargeable Lifetime Transfer: a transfer of value which is made by an individual and is not an exempt or potentially exempt transfer. Crystallised: where an individual has received benefits from their pension fund. Death benefit: the amount on a life insurance policy (or a large lump sum), annuity or pension that is payable to the beneficiary when the insured or annuitant passes away. Defined Benefit Pension Scheme: occupational schemes under which the benefits generated are defined by reference to length of service and salary. Defined Contribution Pension Scheme: personal pension arrangements under which the benefits generated depend upon the contributions paid. Deprivation of Assets: where a person has intentionally deprived or decreased their overall assets in order to reduce the amount they will be charged towards their care and support. Discounted Gift Trust: an arrangement that allows the client to give away capital while keeping a payment stream for life. Discretionary Trust: a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor. Drawdown Pension: a Defined Contribution arrangement that allows the member to draw an income and/or a tax free lump sum from the investments held in the fund. Capital remains invested and remains under the control of the pensioner, but the income is ‘unsecured’ as the value is determined by performance of the investments within the pension fund. Entry Charge: when a CLT is created, an entry charge equivalent to half the rete payable on death is paid on the transfer of any value above the available NRB. Previous CLTs will affect the amount of available NRB. Excluded Property: assets that are exempt from IHT legislation. Excluded Property Trust: a trust for clients who are non- UK domiciled. Exit Charge: where the entry charge or 10 yearly periodic charge has given rise to a tax actually payable, an exit charge will be paid on any distributions made by the trustees out of the trust fund. The rate charged is dependent on the entry and 10 yearly calculations but can never be greater than 6%. Gift with Reservation of Benefit: one that is not fully given away so that either the person getting the gift does so with conditions or restrictions attached, or the person making the gift keeps back some benefit for themselves. Gift Trust: a trust that is used to hold a gist of an investment bond. Impaired Life Annuity: a type of lifetime annuity offered by some insurance companies/annuity providers that is designed for people that suffer from, or have suffered from, a medical condition that results in a reduced life expectancy. Immediate Post Death Interest in Possession Trust (IPDI): when an IIP begins immediately after the death of the person who has created the trust in their Will. 2% 0% 3% 8% 18% 25% Trustees Settlor 10% 10% 10% 10% 10% 10% 10% 35% 10% 10% 18% 10% 28% Appointments or LOANS to beneficiaries at any time