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Where Taxpayers and Advisers Meet

Estate Planning Bond

Laura Tanner
Joined:Wed Aug 06, 2008 3:22 pm

Postby Laura Tanner » Wed Mar 09, 2005 12:21 pm

What if any Inheritence tax would be due and payable on an Estae Planning Bon of £ 150,000?

Joined:Wed Aug 06, 2008 3:14 pm

Postby bob.fraser@towrylaw. » Wed Mar 09, 2005 1:50 pm

I presume that you are referring to the AXA estate planning bond, which operates as a discounted gift trust. Under this scheme, part of the investment is immediate outside the estate.The amount depends on the age and health of the settlor and the level of income drawn. The level of the discount is not guaranteed, and may be challenged by the Inland Revenue if they believe that the settlor was in poor health at the time of setting up the trust. This is why it is best that these trusts are "underwritten" (a medical report is obtained). You would have been told the amount of the discount when the bond was set up. The balance of the £150,000 is a "potentially exempt transfer" as will be outside the estate 7 years from the date the trust was established, and therefore not liable to IHT.
Hope this helps.
If you need further clarification, email me.

Arnold Aaro
Joined:Wed Aug 06, 2008 3:11 pm

Postby Arnold Aaro » Fri Mar 11, 2005 7:54 am

This would allow you to gift cash to your beneficiaries, although they would not be allowed acces to it until the inevitable happened to you.

However you must take an income (which is tax free within certain limits) FOR LIFE from the gift you have made.

The result is that on starting the trust and making the gift, the Inland Revenue class a considerable portion (e.g. 70% for a healthy 60yr old female) of the amount put into the Trust as being immediately outside the estate for Inheritance Tax purposes.

After 7 years the whole amount falls outside the estate, and you have then avoided Inheritance Tax on the complete gift. But of course you are still receiving the income for life.

Don't hesitate to e mail me or call if you want more info on this.


Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail:
Tel: (office) 0208 437 2500 (m) 07957 440 724

[I advise on Inheritance Tax Planning, and specialise in Discounted Gift Trusts and Investments]

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