Qualifying IIP becomes relevant property

Trusts Discussion
1

Hi,

I have a query on what was, ostensibly, a qualifying IIP, settled in June 2003.

The trust originally held two single premium life assurance bonds, which were funded by cash settled to the trust by A. There was a life interest to his spouse B, and remaindermen their children C & D.

On A’s death in October 2011, the proceeds of both life assurance bonds were paid to the trust as A was the only life assured. They were subsequently reinvested into a new investment bond written on a capital redemption basis ie no lives assured.

B continued to receive distributions from the trust.

B died in January. I have been told that this bond was subject to a periodic charge in June 2013, although there is no evidence of this forthcoming, and asked to calculate the potential exit charges. If the trust is subject to exit charges, this calculation is straightforward enough. What I have struggled to understand, and why I have posted, is what has caused the trust to lose its status as a qualifying IIP?

I’d be grateful, if, from the details given, someone can perhaps shed light on what I cannot see.

Thanks

Benjamin Fabi
Principled Paraplanning

2

You may find the short video at https://youtu.be/gy-PAVBPfNk of interest.

Paul Thompson

Canada Life

3

I can only assume that the advice you have received is given on the basis that the IIP came to an end in 2011 when the original trust investment came to an end. However, that would be unusual. It is more likely that the IIP existed over the trust fund, in whatever form it took, so the IIP remained in existence until the death of B. You will have to check the terms of the trust to be sure however.

Paul Davies
Clarke Willmott LLP