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Discretionary trust look to bonds to sidestep tax

Legal & General says more high-net-worth trustees of discretionary trusts are considering shifting their investments into insurance bonds to avoid higher tax charges.

From April 6, 2010, dividend income tax will increase from 32.5 per cent to 42.5 per cent and income tax will increase from 40 per cent to 50 per cent within discretionary trusts.

Head of tax and estate planning Mark Green says that, on top of these tax rises, if discretionary trust trustees put money into a unit trust and encash a unit, they would pay 18 per cent capital gains tax, making it expensive to distribute to a beneficiary.

He says: “With insurance bonds, there is no ongoing tax charge and you can withdraw up to 5 per cent. You are sidestepping the charge until a later period.”

Worldwide Financial Planning IFA Nick McBreen says: “There is an opportunity for trustees to review the investment structure and assets held within the trust.”


F&C UK Select Trust turns around performance

Phil Doel’s F&C UK Select Trust delivered a net asset value total return of 9.2% over the first half of 2009, outperforming its benchmark, the FTSE All-Share Index, by 8.4%, according to interim results released today.This was a significant turnaround in performance, after the trust lagged its benchmark by 12.5% in 2008. F&C says it […]


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