Ask the Experts: We want to close a bond that is held in trust. What's the best way to do this?

Question

My husband has a collective investment bond that is written in trust and valued at £420,000. He would like to close the bond. We have been made aware that there will be tax implications on the gain (£175,000), but we are unsure what we have to do with regard to the trust.

From:
DL/Cardiff

Answer

There are different types of trust, so there are various answers to your question, both from a legal and a tax perspective. So I’m afraid my answer must be general in nature. If something is written in trust, it is given to trustees to look after for the benefi t of one or more benefi ciaries, subject to the terms of the trust. It is the trustees who should be responsible for deciding to close the bond.

The tax payable depends on the type of trust and tax situation of the owner of the bond at the time. If that is the trustees, this in turn depends on the tax situation of the original settlor (the person who established the trust) if still alive, or the trustee’s tax rate after their death.

I would recommend taking some individual advice. The tax consequences of different methods of surrendering the bond and distributing the proceeds could alter dramatically depending on the way this is done, and some straightforward advice could make a substantial difference.

Furthermore, it is important the trust is closed down and funds distributed correctly, with the taxman getting his due amount, while avoiding volunteering extra by not taking the right advice.

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