Wealth Preservation Account
Reduce inheritance tax and retain access to optional yearly payments
Our Wealth Preservation Account gives you the best of both worlds – a product that allows you to potentially reduce your inheritance tax liability, while allowing you full access to the trust assets through optional yearly payments. After seven years, your gift into trust moves out of your estate entirely and any investment growth is outside of your estate from day one.
How the trust works
A trust is a way of managing assets (such as money or investments). It’s a legal arrangement where someone (the settlor) puts assets into a trust and appoints a person or group of people (the trustees) to look after the assets for the benefit of a person or group of people (the beneficiaries). There are different types of trusts, which have different features and benefits.
Our Wealth Preservation Account
Each Wealth Preservation Account is made up of the following elements:
- A series of offshore single premium investment-linked life assurance policies with varying maturity dates
- A double trust arrangement to which you assign legal ownership of the life assurance policies, while retaining the right to receive the proceeds from each of the maturing policies
Accessing your money
Each year, you receive the value of the maturing policies, although the trustees can choose to defer some or all of these maturities if you don't require the funds at the time. The settlor can’t have access to the trust assets at any other time.
Withdrawals using the 5% tax deferred allowance aren't available while the settlor is alive, but the trustees can surrender individual policies, before they mature, and pay the proceeds to the beneficiaries during the settlor’s lifetime.
A discretionary trust
The trust structure of the Wealth Preservation Account includes a discretionary trust. This means that decisions about who benefits from the trust and when, are made at the trustees’ discretion.
All benefits, such as death benefits and the option to surrender individual policies, as well as the right to defer or allow maturities (for your benefit, or for the beneficiaries after your death), are granted at the discretion of the trustees.
Products that can be placed in this trust
This trust structure can only be used with the following products:
- Wealth Preservation Account (through the Isle of Man)
- Wealth Preservation Europe Account (through Ireland)
Tax
Income tax
A chargeable event gain may arise if an individual policy matures, is surrendered or withdrawals are taken in excess of the tax deferred allowance. Depending on your circumstances at the time, you or your trustees may need to pay income tax when a chargeable event gain arises on your Wealth Preservation Account.
To find out more about tax and how it may affect you or your trustees, speak to your financial adviser.
Inheritance tax
Once your Wealth Preservation Account has been in place for seven years, the amount of your original gift into the trust is removed from your estate entirely, and will no longer be included in your estate for inheritance tax purposes.
Depending on the amount of your original gift into the Wealth Preservation Account, and the size of the trust fund, there may be a liability to inheritance tax. This could be when you make the gift, at each ten year anniversary, and when your trustees distribute trust proceeds to the beneficiaries. You can find out more about these charges in our Principal and exit charges briefing note.
Tax rules depend on individual circumstances and may change. Speak to your financial adviser if you need more information on tax.