This information is intended for advisory professionals only.
Flexible estate planning while maintaining access to capital.
Estate planning is becoming more complex
High property prices mean many property owners now carry potential IHT liabilities.
The IHT threshold continues to be frozen until 2031.
Defined contribution pensions will be included in the value of estates for IHT purposes from 2027.
Demand for intergenerational wealth advice is increasing - clients want to pass on wealth efficiently - without losing control or access to their money and capital.
The Transact Flexible Reversionary Trust is designed to help your clients do both.
Key benefits when written within a bond
Reduce estate value for IHT
The trust is typically treated as a chargeable lifetime transfer (CLT), helping move assets outside of an individual's estate after seven years.
Maintain access to income
Clients can retain the ability to access capital through policy vesting i.e. gain ownership overtime.
Passing assets to beneficiaries
Provide a structured framework for passing assets to beneficiaries without probate delays.
How it works
It’s designed for use with Transact onshore and offshore bonds.
Bonds are split up to 1,000 individual policies, which can be varied by the settlor, with flexible vesting options.
When policies vest, the Settlor can ask the Trustees to revert the policies to them, defer them to a later year, or surrender their right to the vesting policies.
The Trustees can also assign or distribute the vesting policies to beneficiaries.
On death of the Settlor, future policy entitlement falls away, and the trust fund can be distributed by the Trustees to beneficiaries, at their discretion.
Case Study:
Sarah has a defined contribution pension
She owns her home outright, which is valued at £900,000.
She has also received assets following the death of her late mother.
Sarah wants to ensure she can pass assets onto her children tax efficiently but is worried about surrendering control of her capital as she may need access to it in retirement – her adviser recommends she invests a portion of her wealth in a flexible reversionary trust within a Transact onshore bond.
The identity of the Trustees are agreed, including one independent professional Trustee (in order to make management of the trust robust), and the trust is registered with the Trust Registration Service.
The trust is set up so 15 policies vest each year – which Sarah will be entitled to.
Sarah has no requirement for additional funds beyond her salary and asks the trustees to defer the 15 policies to a later year.
Some work is required on Sarah’s house. She chooses to use 15 policies and defer the remaining 15 policies to a later year.
Sarah’s son Andrew is buying his first house. To help him, Sarah asks the trustees to assign 30 policies to Andrew, who can surrender the policies in a more tax efficient way due to his personal tax position.
Sarah retires but chooses to continue deferring her entitlement to the vesting policies as her income from her pension is sufficient.
Sarah dies and the Trustees are able to distribute the assets to her children promptly without the requirement to probate. Importantly, as she gifted the assets into trust more than seven years ago, the trust property does not form part of her estate and so there is no IHT charge.
Transact makes it easy
Fully integrated
Transact is the only platform providing fully integrated onshore and offshore bonds, enabling you to run your central investment proposition across all wrappers.
Flexible structure
Both bonds are structured with 1,000 policies but this can be varied by the settlor at outset, providing significant flexibility.
Technical support
Our Transact Technical Services team can provide you with technical support when doing your first flexible reversionary trust case.
