Skandia, part of Old Mutual Wealth, has launched “The Best Start in Life” trust on its UK platform, Skandia Investment Solutions (SIS).
The trust is a tax-efficient planning solution combining the flexibility and control of a discretionary trust, with the option to use a bare trust, if necessary, to improve tax efficiency when distributing the trust fund.
The trust, which has already seen success through Skandia’s international business, will appeal to individuals, such as grandparents, who wish to pass part of their wealth onto beneficiaries, therefore reducing the inheritance tax (IHT) liability on their own estate.
After investing in the SIS Collective Investment Bonds (CIB), to ensure any growth sits outside of the individual’s estate, the investment can be assigned to The Best Start in Life trust. Initially set up as a discretionary trust, the settlor does not have to nominate beneficiaries from the outset or specify specific entitlements to be paid out in the future; however, legal ownership is transferred to the trustees. Additionally the settlor may choose to complete a “letter of wishes” giving guidance to the trustee on how to divide the capital.
The trust also provides further flexibility by allowing trustees to assign the assets to the beneficiary or to make an absolute appointment by creating a bare trust in favour of that beneficiary, which is particularly attractive where the beneficiary is a minor. This means it is the beneficiary, not the settlor on whom any taxable events are assessable. If any taxable amount falls within the beneficiary’s personal allowance then the tax liability can be significantly reduced or mitigated.
Phil Carroll, financial planning expert at Skandia, says: “The ‘Best Start in Life’ trust has proved extremely popular in our international markets, so we decided to extend this to our UK platform. Whilst often perceived as complicated, clever use of trusts can result in significant savings, especially for those who are conducting estate planning. ‘The Best Start in Life’ trust allows trustees to reduce the tax liabilities for the settlor or the beneficiary by using just one flexible tax-efficient solution.”