The WAY Group Newsletter for Financial Advisers | August 2009

There's more to life than death...

5 good reasons why finding the right Trust Is essential to Estate Planning

Family wealth preservation is not solely about ensuring that sons and daughters aren’t shorn of 40% of your intended bequest.

Why wouldn’t you want to ensure that your children and not the Chancellor derive full benefit from monies earned or from investments wisely made? After all, the Revenue has already had a slice of this money.

Saving 40% on death may be a very fine thing but the prospect of limiting the ability to resolve a family crisis, let alone personal income requirements, is a straight forward and understandable reason why people shy away from most forms of trust planning.

Below we list five good reasons why a trust, ostensibly written for IHT mitigation purposes, can be an emotional comfort, not a hindrance, to this important part of the estate planning jigsaw.

Clients can harbour a fear that passing money into trust will result in the loss of both access and control. But a trust can be friend not foe when dealing with the following, very real, lifestyle issues which are fundamental to family life and family wealth preservation:

1. Divorce

1. Divorce:
Every parent wants to help their son and daughter on their way in life and a common assistance is with first house purchase, typically made when they have formed their first real partnership. The often unvoiced fear, however, is that a good relationship turns bad. The consequence of a gift made in happier times that later turn sour, is that divorce or break-up will see up to half of that gift disappear out of the family forever.
Solution:What’s needed is a trust that provides the power to make loans to assist the family but remain as a debt against the trust.

2. Family Emergency

2. Family Emergency:
A son’s business goes bad, sister’s roof blows off, a favourite aunt has a medical problem requiring expensive treatment. Whatever the circumstance, you want to help if you can so you don’t want your money irrevocably tied-up.
Solution:What’s needed is a trust that allows gifts or loans to a class of beneficiaries aside from the appointed trust beneficiaries.

3. Golden Wedding Anniversary

3. Golden Wedding Anniversary:
A distant anniversary now but if you survive to celebrate then you want to do so in style - but is it worth keeping money in your estate just in case?
Solution:What’s needed is a reversionary interest trust with flexibility to take, defeat or defer reversions at each trust anniversary.

4. Care Fees

4. Care Fees:
A fear of anyone ‘of a certain age’ is the potential requirement to cater for one's own long term care needs. The current UK state funding aid is limited, as is the likelihood of radical improvement. For some, local authority care will be sufficient, for others the ability to ‘top up’ to higher comfort levels either initially or eventually is a must.
Solution:What’s needed is a trust that is not vulnerable to attack under the Charging for Residential Accommodation Guide (published by the Department of Health and commonly known as CRAG rules) if estate preservation is the paramount priority, but otherwise provides capital reversions which can be utilised to 'trade up' to care quality of choice.

5. The Surviving Spouse

5. The Surviving Spouse:
Whatever the extent of a couple’s IHT planning, the second to die will usually be left with the rump of the problem.
Solution:What’s needed is single settlor trusts. On first death, the surviving spouse can be appointed to their late spouse’s Trust thus enabling the Trustees to advance non-interest bearing loans to the surviving spouse – particularly relevant if the husband has had the major pension income (as is common) and the widows pension drops to 50%. The Trustees of the surviving spouse's Trust can defer reversions from their plan if no additional income is required, as they have the loan to support themselves. This debt also offsets any influx of assets from the deceased spouse using the spousal exemption.

Trusts have been around since the time of the Crusades when soldiers departing these shores established them to identify where their assets should end up if they did not return. There has been a tendency in recent times to view a trust as merely the supporting mechanism to achieve a single goal but, structured properly, they have far broader merit.

Inheritance tax mitigation remains a very worthy quest but the trust structure utilised is vital both for peace of mind and to maximise the preservation of individual family wealth.

WAY now have over 700 Flexible Inheritor Plans on our books, providing clients with family wealth preservation security over and above the 40% death duty. So if you have an interest in this area and haven’t encountered our arrangements before or even wish to discuss an individual client case, we’d be delighted to hear from you.

Yours sincerely,

Eddie O'Gorman
UK Head of Sales & Marketing
3rd August 2009.

Ends-

Video Link:

 Click to view product video: WAY IHT on the Ascentric Platform

Product Link:

 Click to access the suite of: WAY Inheritor Plans

How to contact us

We hope you found this IFA e-newsletter interesting and informative and that some of the issues raised will prove useful for developing business with your clients? If you wish to discuss any matters arising from this newsletter or, indeed, want to talk to us about any of WAY's products, then you are most welcome to call either Tony Lyons, IFA Support Manager, or Mark Benson TEP, Technical Manager , on head office telephone number: 01202 890895. Or, if you prefer, you can use the website: Contact Form to get in touch. We look forward to hearing from you.

Newsletter: August 2009.

Please Note: This newsletter commentary has been prepared for Financial Intermediary Clients and Professional Associates of WAY Investment Services Ltd and is not intended for and must not be distributed to Private Investors. This information is supplied to you in confidence and you may not pass it on to any other party without prior written consent. Past performance is not necessarily a guide to future returns and changes in rates of exchange between currencies may cause the value of investments to rise or fall. No representation or warranty is given (express or implied) as to the accuracy, completeness or correctness of the information nor the opinions, interpretations and conclusions contained in this commentary. The commentary does not constitute investment advice or a recommendation to purchase or sell any security. Neither the author nor WAY Investment Services Ltd accept any liability whatsoever for any loss or damage arising in any way from any use of or reliance placed on the commentary. WAY Investment Services Ltd is an Appointed Representative of WAY Fund Managers Ltd which is authorised and regulated by the Financial Services Authority.