Friends Provident widens choice for IFAs on IHT Planning

Friends Provident, the FTSE 100 life and pensions company, has added a bare trust to its Discounted Gift Plan (DGP) in a move to provide wider flexibility to IFAs and their clients for inheritance tax planning (IHT) purposes.

This latest addition means that investors in the Discounted Gift Bond will now have the choice of using either the new Bare Trust or the Discretionary Trust when it comes to putting future financial affairs in place. The difference between the two trusts lies in the way they define the beneficiaries, and in their IHT treatment.

The Bare Trustallows the investor to name specific beneficiaries, and thesecannot be changed or added to at a later date. As long as the beneficiaries are all adults, a gift into this trust is a potentially exempt transfer. In contrast, the Discretionary Trustgives the trustees power to pay benefits to one or more of a wide class of beneficiaries, such as children or grandchildren. A gift into this trust is a chargeable transfer for IHT planning.

Christine Foyster, head of wealth management marketing at Friends Provident, said: “Having both the Bare Trust and the Discretionary Trust in our Discounted Gift Plan means that we can now offer even more choice to IFAs when they are helping clients to plan for the future. Individual circumstances are key here – investors with growing families may want to keep their options open as to who will eventually benefit; while others may wish to name specific individuals.”

The value of the Discounted Gift Bond is not guaranteed and can go up and down depending on investment performance. The total amount that the investor and trustees get back could be less than what has been paid in.