If you're going to do it, do it right and use TrustS

If your life insurance is being arranged for family protection purposes, as is often the case with tax-efficient Relevant Life Policies, then there's a consideration which is often overlooked...

Now if you read the headline, you might be thinking "Yeah, yeah, I've read all about the benefits of writing a policy into trust."

If you look again, there's an S on the end of trust! This is because the use of Multiple Trust Planning arrangments can be an excellent way of saving potential tax charges from assets held in trust. That's money which can be spent directly on your family rather than winging its way to the coffers of HMRC.

To give you some background, in a precedent case (Rysaffe Trustee Co (CI) versus Inland Revenue Commissioners 2003) the court decided that when discretionary trusts are created by the same person on different days then each trust would benefit from its own Nil Rate Band (£325,000). Below this NRB there is no 10-year periodic charge payable, which is typically 6% on assets held in trust above the NRB on each 10-year anniversary of the trust being created.

This gives rise to the principal of 'Rysaffe Planning'.

An example:

Imagine you've died 9.5-years after setting up your life insurance and left behind a sizeable amount (£1.5m) to help your spouse raise the kids and maintain their lifestyle after losing your income. The money is not for debt repayment so, more often than not, it would be beneficial to keep the proceeds in trust for as long as possible due to the protection this offers.

What are the implications of this though...

	Before Rysaffe Planning	After Rysaffe Planning
Sum Assured	£1,500,000	£300,000 X 5 plans
Nil Rate Band	£325,000	£325,000 per plan
Total Sum Assured in Excess of NRB	£1,175,000	£0
Periodic charge at each 10-year anniversary	£70,500	£0

 As you'll see, by incorporating these principals into your arrangements it could save your dependents a whole lot of money

down the line.

Will it cost you anything?

YES!  

Based on a 48-yr old male, non-smoker, taking cover over 20-years the Multiple Trust Planning arrangement would cost around 12% more overall. 12% of a cost which is tax-deductible and paid for by the business.

This won't be for everyone, but to some that will sound like a very good deal!

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