Peace of mind in uncertain times

Flexible Reversionary Trust

Following on from our blog about Loan Trusts for Inheritance Tax Planning and how this could offer a starting point for Inheritance Tax planning, this blog considers the option of Flexible Reversionary Trusts.

Advantages of a Flexible Reversionary Trust

The Flexible Reversionary Trust, like the Loan Trust, can offer ongoing access but with the major advantage that the original amount placed into Trust falls outside of your estate, and any liability for IHT, after seven years and any growth in the value of the Trust is outside of your estate immediately.

It’s an uncertain future

In a world marked by constant change, the upcoming elections in seven of the world’s ten most populous nations intensify the prevailing uncertainty. As these countries, collectively home to nearly half of the global population, prepare for 2024 elections, the unpredictable nature of political landscapes becomes increasingly evident.

Closer to home, discussions within the political classes have added an additional layer of uncertainty, particularly surrounding the potential abolition of Inheritance Tax (IHT). This deliberation has prompted some individuals and families to adopt a wait-and-see approach, a stance that, while understandable, complicates the responsibilities of financial advisers. The looming ‘what if’ scenario can cast a shadow on conventional solutions, such as Trusts, making the advisory process more challenging.

Peace of mind for an uncertain future

The abolition of IHT is unlikely. More plausible is the adjustment of existing reliefs and allowances. Therefore, hesitating on making a decision, inadvertently extends the 7-year gifting (inter-vivos) period, which could prove counterproductive and financially costly for your family.

Amidst this uncertainty, a Flexible Reversionary Trust emerges as a valuable means to address your IHT liability promptly, utilising the current advisory framework. Notably, a Settlor retains the right to access 100% reversion of assets, offering a reversible solution if IHT were to be abolished.

Safeguarding assets

It is important to recognise that, even if IHT were to be removed at its current rate of 40%, the advantages of holding assets in Trust persist. With the effective ‘tax rate’ on divorce typically 50% and care fees up to 100%, Trusts remain a prudent choice for safeguarding assets for future generations, regardless of IHT considerations.

Flexible Reversionary Trusts can invest in Collectives, providing a tax-efficient avenue for transferring wealth, and a full loan facility, safeguarding assets from various social impacts (divorce and bankruptcy) and facilitating true intergenerational tax planning.

What value do you put on ‘peace of mind’?

If you would like further information on the planning opportunities in relation to your own circumstances, please complete the form below or call us on or call 01825 76 33 66.

We are grateful to Mark Wintle at Way Trustees for his contributions to this blog.

This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

Please note that the Financial Conduct Authority (FCA) does not regulate some aspects of estate or tax planning or trust advice.

Second Opinion Service

We often seek out more than one perspective for matters of health. The same common-sense advice can apply to financial health as well. That’s why we offer our second opinion service.

If you, your family or close friends could benefit from a fresh perspective, please let us know in the form below. Any information you share with us will be treated with the careful handling it deserves.

At a second opinion meeting, we’ll assess where you are now, where you want to go, and the best ways we see to close that gap. If you could potentially benefit from working with us, we’ll say so. If we find you are already on the right financial path, we’ll tell you that as well.