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Where Taxpayers and Advisers Meet

Assign Insurance Bond

TW1234
Posts: 25
Joined: Sat Jan 07, 2017 11:42 am

Assign Insurance Bond

Postby TW1234 » Sun Nov 10, 2019 12:53 pm

It is intended to assign an insurance bond, that has a substantial accrued profit, in its entirety to a minor as an outright gift.
(A discretionary trust is not required)
I believe that by so doing, no chargeable event is triggered, the assignment becomes a PET, at the value at time of assignment and there would be a saving of income tax if the settler were a 40% tax payer whilst the recipient remained a lower rate payer at such future time as the bond were encashed.

Does the assigned bond have to be placed in a formalised bare trust, with the insurance company acting as trustee or would the minor's parents/guardians automatically become the trustees? If the latter, should the bond be assigned to the minor's name or to the "parents' names as trustees for the minor's name"?

Thanks for any comments.

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: Assign Insurance Bond

Postby maths » Mon Nov 11, 2019 12:25 pm

I believe that by so doing, no chargeable event is triggered, the assignment becomes a PET, at the value at time of assignment and there would be a saving of income tax if the settler were a 40% tax payer whilst the recipient remained a lower rate payer at such future time as the bond were encashed.
Correct.

Does the assigned bond have to be placed in a formalised bare trust, with the insurance company acting as trustee or would the minor's parents/guardians automatically become the trustees? If the latter, should the bond be assigned to the minor's name or to the "parents' names as trustees for the minor's name"?
The current owner of the bond could simply declare that henceforth he/she held the bond as bare trustee for the minot.

Alternatively, the bond could be transferred to the minor's parents for them to hold as bare trustees for the minor.

The bare trust should contain all relevant trust provisions.

The insurance company should be notified of the changes.

I assume that the parents are not the current beneficial owners of the bond.

TW1234
Posts: 25
Joined: Sat Jan 07, 2017 11:42 am

Re: Assign Insurance Bond

Postby TW1234 » Wed Nov 13, 2019 3:32 pm

Thank you for the response.

TW1234
Posts: 25
Joined: Sat Jan 07, 2017 11:42 am

Re: Assign Insurance Bond

Postby TW1234 » Wed Feb 19, 2020 12:29 pm

I have attempted to transfer ownership of the bond into the "name of the parent in trust for the name of the grandchild".
The Insurance Company have stated that:-
1 They do not have any suitable draft transfer forms to accomplish this.
2 A letter requesting that such action be taken is inadequate.
3 An IFA or solicitor is needed, who should draw up a suitable trust deed--even if only a bare trust is required.

Such professional involvement seems over the top as it is intended to make the transfer of ownership in this tax year and the grandchild will attain majority early in 2020/21 so a further transfer would be soon needed.
Can anyone advise whether the Insurance company are correct or how to achieve such a bare trust arrangement at minimal effort and expense, please?

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: Assign Insurance Bond

Postby maths » Wed Feb 19, 2020 8:01 pm

Very surprised that insurance company doesn't have its own drafts for you to use (albeit at your own risk). A google search reveals many documents insurance companies let there clients use.

I would suggest that you can simply execute a declaration of trust stating you own the legal title as bare trustee for your grandchild; this is the simplest option in particular given that shortly the grandchild will be age 18 and can then take the policy in his own name.

TW1234
Posts: 25
Joined: Sat Jan 07, 2017 11:42 am

Re: Assign Insurance Bond

Postby TW1234 » Thu Feb 20, 2020 3:32 pm

Thanks.
The lack of a draft seems to relate to my attempt to create an absolute trust that excluded the settlor as a trustee and used only the minor's parents. As you say, this will not be important as the minor will fairly soon reach majority.

However, I will be faced with a similar situation for another but much younger grandchild and another bond.

I still believe that no written purpose made document is essential to create a bare trust, ----but such will not satisfy the insurance company.

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: Assign Insurance Bond

Postby maths » Thu Feb 20, 2020 3:49 pm

I still believe that no written purpose made document is essential to create a bare trust,
I don't understand ?

If you want the parents of the child to be trustees and you not to be a trustee then you will need to assign (ie transfer) the bond to them (you will be a so-called settlor) for them to hold as bare trustees for their child.

Under this option you are transferring both the legal title of the policy to the parents who will then hold such title on trust for their child.

Under the declaration of trust option I mentioned earlier you retain legal title transferring only the beneficial interest in the policy to the child.

Either option isn= valid; the latter easier.

The insurers would need to be notified under either option.

AG another contributor to this forum may add some useful comments if he reads this which may be of help to you.

TW1234
Posts: 25
Joined: Sat Jan 07, 2017 11:42 am

Re: Assign Insurance Bond

Postby TW1234 » Thu Feb 20, 2020 4:26 pm

"If you want the parents of the child to be trustees and you not to be a trustee then you will need to assign (ie transfer) the bond to them (you will be a so-called settlor) for them to hold as bare trustees for their child."

Thanks again.
This was my intent and it is that combination of assigning to the parents, but only as trustees ( and without the settlor's inclusion as a trustee) that is not catered for by the available draft documents.

A simple declaration of trust would achieve that (and I believe that such is not even actually required to be in writing). Hence my belief that a letter informing the insurance co that such was the situation should suffice. Understandably I can see that they would prefer something more substantial, but legal fees for drawing up a declaration/deed is a bit excessive..

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: Assign Insurance Bond

Postby maths » Thu Feb 20, 2020 8:16 pm

Strictly speaking it is correct that nothing in writing is required to effect a self declaration of trust of personalty (eg life policy).

However, for all practical purposes, such should be created in writing typically by way of a deed as evidence at some point in the future will almost certainly be required to be produced.

AGoodman
Posts: 1043
Joined: Fri May 16, 2014 3:47 pm

Re: Assign Insurance Bond

Postby AGoodman » Fri Feb 21, 2020 12:19 pm

Wot maths said

It's true that the insurance company's precedents do not quite work if you want the parents to be trustees - they either assume the assignees will be the absolute owners or trustees of a separate settlement.

If you want the parents to be trustees, you may need a separate deed of assignment and bare trust. A solicitor could knock one up quite easily. You can't assign the policy just by writing a letter to the insurance co.

You may well find a precedent for the far easier way, declaring yourself trustee. There are lots if you google "life policy declaration bare trust"


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