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Increased demand for trust planning

Advisers say increased demand for trust planning is helping to create new opportunities in offshore bonds.

Financial adviser research1 carried out by Old Mutual International highlights the importance of trust planning. The data shows that out of those advisers who see new opportunities in offshore bonds, one in five say this is down to an increase in demand for trust planning.

The research also shows that the number one area that advisers want support in is in trust planning.

This increased focus and demand for trust planning could be driven by a combination of the following factors:

 

Trusts help advisers demonstrate the value of advice:

According to our research, 60% of advisers believe it is difficult for the advice industry to demonstrate the value of the advice that they offer to their clients. Even in the UK, where RDR has been in place for over five years, 54% of advisers say demonstrating the value of advice is still an area of difficulty for the industry.

Advisers recognise that the real value they can add for their clients is in the tax and financial planning aspects, and trusts play a key role in helping advisers meet the financial planning needs of their clients.

Clients are unlikely to ‘DIY’ in this area and may be unaware of the factors they need to consider when looking at trust planning, creating an opportunity for advisers to make a real difference. Trust business is also invested for the long-term, helping advisers build long-term business value.

 

 

IHT receipts hit record high:

A record £5.2bn was collected in inheritance tax (IHT) receipts by HMRC in 2017/18. That’s a 67% jump in five years. This is a phenomenal amount, especially when we consider that most of the tax could have been mitigated through some careful financial planning.

With IHT set at 40%, there is a clear opportunity for advisers to help their clients manage their tax exposure and demonstrate real value in the advice they provide. With the rise in property prices, more families will be concerned about IHT, and it’s not just the wealthy who are impacted.

 

 

The family structure is changing:

With four in ten marriages ending in divorce2, nearly half of which involve dependent children3, and one in 20 under 16 year olds experiencing the death of a parent4, the family structure can change rapidly. Around a third of families now have a step-child5, showing just how common the blended family has become.

Even if a client isn’t currently part of a complex or blended family structure, they could be in the future, or their children could be. Trusts can successfully help protect wealth, ensuring it is passed on to the right people at the right time, regardless of the changes that take place within the family structure.

 

 

Why offshore bonds are a popular choice in trust planning

A key advantage of offshore bonds is that they are a ‘non-income producing’ investment. As no income is produced, there is nothing for the trustees to report or any tax to pay on an arising basis. Tax only becomes payable if a withdrawal, surrender or death creates a chargeable gain. This means less administration and possibly nothing to declare each year on a tax return.

Offshore bonds are also extremely tax efficient. They benefit from gross roll up, which means they can help build growth faster. When it comes to distributing money to beneficiaries, offshore bonds provide an efficient and effective way for trustees to pay money out. This includes the ability to assign segments of the bond to adult beneficiaries rather than encashing them.

It is only the amount of growth on each full segment surrendered which is subject to tax, and beneficiaries can use their own personal allowances and savings allowances to reduce the amount of tax they pay.

 

Increased adviser support

If you would like more support in the area of trust planning, a new hub has been created on the Old Mutual International website under a new ‘TECHNICAL CENTRE’ tab. Here you will find a new trust planning section, which provides a five step programme of support in trust planning, helping you understand trusts, choose the right solution for your clients, and continue to build your knowledge.

Your Old Mutual International consultant can also provide you with support in this area.

 

For financial advisers only. Not to be relied on by consumers.

The information provided in this article is not intended to offer advice. It is based on  Old Mutual International's interpretation of the relevant law and is correct at the date shown on the title page. While we believe this interpretation to be correct, we cannot guarantee it. We cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.


1 Old Mutual International adviser survey, June 2018, 180 respondents from across the UK, Europe, Middle East and Asia.
2 Office of National Statistics estimate 42% of marriages end in divorce.
3 Office of National Statistics, Divorces in England and Wales: Children of Divorced Couples, released Nov 2015, shows in 2013, 114,720 couples divorced, and 55,323 had one or more child under age of 16.
4 http://www.childhoodbereavementnetwork.org.uk/research/key-statistics.aspx
5 Aviva - The Family Finances study 2014.

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