Trust

Question 1

Immeadiete post death trust - interest in possession trust

Answer 1

Beneficiaries has a present right
Commonly used by couples that have remarried and have children form previous relationships- to ensure the partner can remain in property but children benefit after his or her death

Question 2

Vulnerable people trust

Answer 2

A minor under 18 - who’s parents have died
Disabled person

This type of trust has a beneficial tax regime

Question 3

Sjp absolute trust

Answer 3

Treated as pets
No pier to change
Once beneficiaries reached the age of majority they have access
Have to inform beneficiaries of their interest
Charge falls on settlor if chargeable events is more than £109 unless beneficiaries over age of majority

Question 4

Sjp DVT

Answer 4

To be used with life assurance plans including investment bond settlor or wife is excluded beneficiaries
Is classified as a CLT poss @20% 25% if paid by settlor
beneficiaries has no right to capital or income instead the trustee can appoint income or capital to beneficiaries
Need to consider periodic and exit charge
Offers total flexibility as to who can benefit
Default beneficiaries benefit
Capital /income is total discretion of trustee
Tax due on settlor if alive and U.K. Resident if not the trustee if uk resident if not then beneficiaries

Question 5

DGP

Answer 5

Immeadiete IHT benefit also on growth
Income for life

But inflexible
Income level cannot be increased or decreased
Can be turned off but trigger IHT charge
If income payment not spent will form part of estate
As income is fixed at outset not good for younger clients 60 , 70 80
Can be offers by DVT or absolute
Should be written on lives of all or some beneficiaries

Question 6

Loan plan

Answer 6

Gradual reduction providen loan payments chosen and spent
Income can be increased reduced an stopes at discretion of settlor
Full access to capital
No Income tax if cgt liability if income with 5% cumulative
Investment growth outside of estate
No PET OR CLT on establishing trust
Younger lives assured

Question 7

Llps

Answer 7

No benefit unless qualifications rules met
Evidence the client can afford to gift amount invested and that’s it is a outright irrevocable gift even is payment doesn’t cover care cost no further benefit
Immeadiete needs annuity is better if they are already funding care
Not recommend if client won’t survive 7 year s
Most clients 6O+
Can only be arranged with single settlor
Income can be increased by fixed % every year
All future growth outside of estate
Younger lives assured

Question 8

Llps vs Loan plan

Both provide income and access

Answer 8

Cannot access Capital on Llps but can on loans plan
If clients age and health means they don’t have enuf time for loan plan to effective then Llps should be recommended
Llps inappropriate if they want ability to change income levels
Loan plan to be recommend if client wants control of when to receive income - have to meet qualifying criteria with Llps