Sun Life International is extending a helping hand to investors who are looking to prevent a visit from the taxman.
The company's new estate planning bond 2 is targeted at older investors with large estates who are looking to minimise their exposure to inheritance tax (IHT) by using offshore bonds. The product is a revamp of its older estate planning bond, which was overhauled to include greater fund links. Income is payable in Euros, Sterling or Dollars, to reduce currency risk.
The bond has two components. The first is the grantees fund which provides the investor with income at the same time as reducing the value of the estate by removing a lump sum from it. Because it pays income it is therefore exempt from IHT.
The second is the residuary fund, which is placed in trust outside the estate, making it a potentially exempt transfer (PET). This means that providing the investor lives for at least seven years after buying the bond, no IHT will be paid on this part. Should the investor die before this, their heirs will have to pay IHT on a sliding scale over the first seven years.
IHT is a complex area. The estate planning bond 2 is not unique to the market but it is a clever way of minimising the amount of IHT liability. However, like all IHT planning instruments that use PETs, it relies on the investor staying alive for the first seven years.