Evening All,
I have never dealt with this type of policy and need some guidance please.
I am dealing with a estate where the deceased held a legal & general discretionary trust policy for a life policy sum of £230k.
The total value of the estate is under £1m and all goes to spouse.
The trust was set up 15 years ago and the beneficiaries are the spouse and child.
Am i right in thinking that the trust falls outside of the estate for iht purposes?
Are there any 10 year anniversary charges and or exit fees,even if the estate is under the iht threshold?
Does this trust need to be registered?
Thank you in advance.
Tina
If the policy value falls within the £1m. figure then whether or not it “falls within” the IHT chargeable estate is perhaps somewhat academic. It might make sense to contact the legal dept. of L&G to see what they have to say. There should be no anniversary charges as the trust will have been able to make use of its own NRB, albeit you will need to do your sums as regards any impact that that might have on the £1m. In other words it could, perhaps, depend upon the value of the estate. L&G certainly ought to be spoken with. Life offices who offer trusts usually have a legal dept. who will know exactly how this should play out and will do the maths. for you…
Might be an idea to hold the money for the child in the trust, otherwise it’ll form part of spouse estate and cause a further IHT problem. Exit and periodic may apply.
Thank you to all that have responded.
The client has found an old letter from legal and general, when the policy was set up, confirming that there are no periodic or exit fees?
Hopefully, legal and general’s legal department can also confirm this.
We shall see🙂
Provided the Trust was worth less than 80% of the NRB at the 10 year anniversary, and there were no chargeable lifetime gifts in the 7 years before the trust was set up, there would have been no requirement to deliver an iht100. If there was no charge on the ten year anniversary, no iht will arise on an appointment before the next ten year anniversary.
The Trust is not aggregable with the estate for iht on the death, assuming the deceased was not a beneficiary, so no GWROB applies.
If the policy did not mature on the death, it can be appointed now to the beneficiaries without an income tax charge arising against the trustees. If it did mature, advice needs to be taken on the income tax position.