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18 to 25 Trust

18 to 25 Trust

The father of Louise and Mathew has died, leaving them benefits in his Will.

Client Circumstances:

  • Louise and Matthew aged 11 and 14 respectively.
  • The Will specifies entitlement at age 25 equally.
  • Estate assets are £372,000 cash from investments.
  • Trust Income Tax is confirmed as 45% on Interest and 37.5% on deposits excluding the £1,000 lower rate Band).
  • Trust Capital Gains Tax is confirmed at 28%.
  • Trust CGT allowance £5,500.
  • No income required initially from the Trust.

Recommended Solutions:

  • Emergency Reserve Fund provision to be held in a Trustee bank account £20,000.
  • Remainder of £352,000 to be invested in an offshore investment bond.

Benefits from advice given:

  • Income and Gains are rolled up Gross (tax free).
  • No tax is paid within the Offshore Investment Bond.
  • Policy denominated in British Pounds.
  • Investments within the Offshore Bond are diversified across the main asset classes to match the model portfolio for the Trustees’ attitude to risk.
  • A pooled investment by a packaged tax wrapper.
  • Ability to access specialist funds.
  • Ability to withdraw up to 5% of the initial invested sum per annum without tax consequences.
  • Investment can be transferred at age 25 by ‘assignment’.
  • Investment can be encashed by the beneficiary children.
  • Children are taxed on encashment at their own Income Tax rates from 0% to 45%.
  • Income and Growth as well as tax has been accumulated until investment is encashed.

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Future Servicing

We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.

This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.

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