The newly-created Lifestyle Trust aims to attract a younger generation towards using trusts for inheritance tax planning.
Clients can decide on future dates when they might wish to withdraw segments from the trust, and can decide whether or not to take the entitlement as they approach each date.
Policy segments can either be accessed immediately, at a later date, or assigned to a loved one.
There is also the flexibility to top-up the Lifestyle Trust at any point.
If an entitlement is postponed, the funds stay within the trust and remain outside of the policyholder’s estate, and therefore will not incur an inheritance tax charge.
Rachael Griffin, financial planning expert at Old Mutual Wealth, said setting future dates can provide an opportunity for a financial adviser to revisit their customer’s financial plan and offer advice at key points.
She said: “We are seeing growing demand for inheritance tax planning solutions with greater flexibility that can adapt to customer’s changing needs.
“The flexibility of the Lifestyle Trust will help make trust planning more attractive to those who might otherwise see trusts as locking away their savings.”
We are seeing growing demand for inheritance tax planning solutions with greater flexibility. Rachael GriffinMs Griffin pointed out flexibility in trust planning is becoming extremely important, with people living longer and being less certain over what money they will need to support them in later life and in retirement.
Unlike a discounted gift trust, where the right to withdrawals is ring-fenced at outset and cannot be changed, this new product offers more flexibility to adapt over time according to an individual’s changing needs, she added.
The Lifestyle Trust is available to customers who invest in either an Old Mutual Wealth bond in the UK or an Old Mutual International bond.
Old Mutual International bond customers can also choose to use Old Mutual International Trust Company to run the Lifestyle Trust on their behalf.
Colin Low, managing director of Suffolk-based Kingsfleet Wealth, said at first glance the Lifestyle Trust looks similar to the Canada Life Wealth Preservation Account, which he added was “a really good scheme”.
Mr Low said: “Old Mutual are obviously very aware that estate planning is coming back into the market, in the sense that property prices are rising and everyone is beginning to understand the new inheritance tax rules now.”
He pointed to fresh exemptions announced by chancellor George Osborne during his Summer Budget, and said now clients have a degree of certainty from which they can base their planning around.
He said: “We have used the Canada Life version for a number of clients and it’s very effective and very simple. The only problem is when the trustees are based outside of the country and need to sign the paperwork.”
“It is not for everybody, but for the type sort of client - probably those who are pretty cash-rich - to be able to use a trust as part of their retirement planning is not unreasonable.
“For those who decide they don’t need the funds, they can just leave it and have another look next year,” adding that it would probably suit those clients in their 50s and 60s.
katherine.denham@ft.com
