Estate Planning Our Trusts Controlled Access Account Generations 1360X784

Controlled Access Trust

Passing on your wealth to a child

Peter’s story

Gifting money to his godson

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About Peter                           

Peter is 52 and is guardian and godfather to his nephew, Cameron who is 16. He’d like to give him £50,000 to help him buy his first home.

Peter’s goals

Peter wants to provide a pot of money to help Cameron buy a home but doesn’t want him to access the money until he’s at least 25.

The Controlled Access Trust

With the help of a financial adviser, Peter decides to invest £50,000 into a Controlled Access Account.

The trust is a bare trust, with a series of life assurance policies that have different maturity dates. This is a tax-efficient way to receive payments and securely controlled by the trustees, appointed by Peter.

Deciding when a child can access the trust

With this trust, the maturity dates can be set to a date in the future – after Cameron’s 18th birthday and up until to the age of 49. Peter arranges for all policies to mature on the anniversary after Cameron’s 25th birthday.

The beneficiaries are split between Cameron, who’ll receive 99% of the proceeds of each policy and an adult beneficiary who’ll receive 1%. This means that Cameron cannot force access to the trust when he’s 18, as the policy is subject to a bare trust with an adult beneficiary. Peter makes himself one of the trustees, so he can control when Cameron receives the money.

Payments from the trust

After his 25th birthday, when the policies reach their designated maturity date, Cameron can choose to allow the policies to mature.

By the time the Controlled Access Account matures, the investment would have grown to £71,624 (assuming 4% annual investment growth).

The maturity proceeds can now be paid to Cameron and the adult beneficiary can choose to waive their share by assigning it to him. Or, Cameron can choose to endorse the policy and continue with the investment.

Tax efficiency

The gift into each Controlled Access Account is a potentially exempt transfer and therefore outside of Peter’s estate, as long as he lives for another seven years.

When it comes to any tax due on the maturities, 99% of any tax on the gain will fall on Cameron. The remaining 1% will fall on the adult beneficiary – if they haven’t assigned their share to Cameron.

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