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bigduckontax, Accountant
Category: Tax
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I am a trustee of an investment Bond written under a family

Customer Question

I am a trustee of an investment Bond written under a family trust in 1985, the settlor has passed and beneficiaries wish to encash. Bond was for an original investment of £60k.Could you help and advice tax/hit situation during term of Bond and on encash net. Thanks
Submitted: 8 months ago.
Category: Tax
Expert:  Nicola-mod replied 8 months ago.
I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Customer: replied 8 months ago.
Hi Nicola, yes I can wait. Just noticed a mistake' should read IHT'- need a Trust and Tax Expert I think!
Expert:  Nicola-mod replied 8 months ago.
We will continue to look for a Professional to assist you.
Thank you for your patience,
Expert:  bigduckontax replied 8 months ago.

Hello Dave, I am Keith, one of the experts on Just Answer, and pleased to be able to help you wit your question.

There will be an IHT charge due on the Trust every 10 years. There will also be an IHT exit charge on the Trust's dissolution.

I do hope that you have found my reply of assistance.

Customer: replied 8 months ago.
Confused! I thought FA2006 was not retrospective? There have been no withdrawals, loans or changes to the Trust since inception. Your comments please.
Expert:  bigduckontax replied 8 months ago.

Trusts are subject to IHT every 10 years and it is now over a decade since FA 2006 went on the statute book. There is also an IHT exit charge when trusts are wound up.

Customer: replied 8 months ago.
are we saying that an Investment Bond effected in 1985 and for all the other thousands of bonds effected prior to 2006 are subject to FA2006?
Expert:  bigduckontax replied 8 months ago.

No, I am saying that as a Trustee there are liabilities. Here is the guidance from The Association of Chartered Certified Accountants:

'Capital gains made by the trustees while they are managing the trust assets will give rise to capital gains tax. Trustees may also have to pay inheritance tax in respect of the property held within the trust. Inheritance tax will be paid every 10 years at a maximum of 6% of the value of the assets within the trust.'