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Product Matters

Inheritance tax planning is one of the areas of financial planning that has by and large managed to resist the onslaught of low-cost, league table-driven, direct-access solutions for consumers.

The two most obvious reasons for this are that the sort of people affected by IHT tend by definition to have the cash to pay someone else to sort out their problems for them and in most cases IHT is too complicated to tackle without professional help. So here is another tool to help IFAs deliver value to their clients.

The Wealth Pres-ervation Trust is a tax mitigation tool designed for those who want to gift capital of £100,000 or more while retaining a future income stream from the capital.

The investor makes a potentially exempt transfer to a Lombard private client&#39s portfolio on the lives of the beneficiaries, specifying the level of income that they would like to have paid to them from the portfolio. The investor then assigns the portfolio to the trustees of the WPT and enjoys the income stream (of up to 5 per cent) for a specified term.

If death occurs after seven years, then the value of the gift falls completely outside the estate for IHT purposes. If death occurs within seven years, then the value of the gift can be discounted to take into account the value of the income stream specified by the investor.

Investment choice within the PCP offers around 600 different funds managed by some 40 different fund management groups. The annual policy fee applied to the portfolio is £341 (reviewable). Annual management charges on the funds vary from 0.5 per cent to 1.5 per cent.

Tom McPhail is head of research at Torquil Clark


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