DISCRETIONARY TRUST DEED TO USE WITH A SCOTTISH WIDOWS OEIC

Transcription

1 DISCRETIONARY TRUST DEED TO USE WITH A SCOTTISH WIDOWS OEIC

2 Below are some guidance notes to help you decide whether you should use this discretionary trust. It is very important that you read these before deciding whether to use the trust. If you have any questions we would be happy to help. Please read these carefully you are responsible for making sure that this form is completed correctly. WHAT IS A TRUST? When you die, all of your assets are included in your estate. Unless your OEIC (Open Ended Investment Company) is written in trust, its value is also included. Inheritance tax (IHT) is due at 40% on anything over the IHT threshold (known as the nil rate band, currently 325,000 until 5 April 2017) that is not left to a surviving spouse or registered civil partner. Once any IHT has been paid on your estate, the balance can be paid out to your beneficiaries. The executors of your Will will pay out the funds or, if you haven t left a valid Will, the administrators of your estate will pay it out under the rules of intestacy. This can be a lengthy business. If you write your OEIC in trust, the trustees can decide what to do with the funds possibly choosing to pay them out to beneficiaries or even keep them invested. The value of the OEIC at the time the trust is created will not be included in your estate if you survive for 7 years from making the gift into trust, although there may be IHT to pay when you create the trust if the value of the gift into trust (the OEIC and possibly future regular premiums into the OEIC) is not within your available nil rate band. There may also be IHT to pay every ten years or when assets are taken out of the trust. The current rate is a maximum of 6% of the value over the trust s nil rate band, though the trust s nil rate band may not always be available in full. HOW DO TRUSTS WORK? When you set up a trust you appoint beneficiaries and trustees. The beneficiaries are the people you want to benefit from the trust. The trustees are responsible for making sure the trust assets are paid to the beneficiaries or invested on their behalf. Beneficiaries and trustees can be the same people if you want, although this may create a conflict of interests. You will also be a trustee, so that you will have some direct control over the trust you set up. You can add extra beneficiaries to the trust at a later date. The trustees can decide which of the beneficiaries should receive the trust assets and in what proportions. You can give guidance to the trustees in a letter of wishes indicating what you would like them to do, which ensures that the trustees are aware of your wishes in the event of your death. Any guidance you give to the trustees is not legally binding on them. IMPORTANT INFORMATION YOU SHOULD KNOW A trust is legally binding. Once it has been set up it can t be cancelled. You should read your Deed of Trust carefully before you sign it. If you have any doubts about whether it is right for you, or whom you should appoint, you should talk to your solicitor or accountant. By completing this form you are giving your OEIC away. You keep some control as a trustee, but you must always act in the interests of the beneficiaries. You cannot include yourself or your spouse or registered civil partner amongst the beneficiaries, although your widow, widower or surviving registered civil partner may benefit at the discretion of the trustees after your death, unless he/she is also a settlor of this trust. It is possible to change beneficiaries and trustees although you do have to go through a formal process to do so. It is important that you appoint at least one additional trustee. A trustee will not be personally liable for any loss in the value of the trust fund unless the loss involved fraud or dishonesty on the part of the trustee. Professional or other trustees who are paid for acting as trustees will also be liable if they are negligent. Any income arising in the trust will be paid to the trustees. The trustees can either pay it out to beneficiaries, net of tax, or (during the period of 21 years from the creation of the trust) reinvest it. After 21 years, the income must be paid to one or more of the beneficiaries. Any encashment proceeds of the trust assets must be paid to the trustees who will either reinvest them as trust assets or pay them out to beneficiaries, net of tax. Putting a regular savings OEIC in trust at outset may be exempt for IHT purposes as the regular payments into the trust may be treated as exempt under the normal expenditure out of income exemption or indeed the annual 3,000 gift exemption. 1

3 IMPORTANT INFORMATION YOU SHOULD KNOW (CONTINUED) Any gift that is not exempt will be treated as a chargeable transfer. The amount of the chargeable transfer, if any, may have to be reported to HMRC (HM Revenue & Customs) within twelve months. The following are the HMRC reporting levels for chargeable lifetime transfers: where the transfer is cash or quoted shares and the transfer, plus any other chargeable lifetime transfers made within the previous seven years, exceeds the Nil Rate Band in that year. in other circumstances where the transfer, plus any other chargeable lifetime transfers made within the previous seven years, exceeds 80% of the Nil Rate Band in that year. Any chargeable transfers made in the 7 years prior to your death will be included in your chargeable estate on death. The trustees will need to complete a tax return form when requested to do so by HMRC and will need to complete Forms IHT100 and IHT100c when capital is paid out to the beneficiaries and Forms IHT100 and IHT100d every ten years. There may be an IHT charge on the trust every 10 years if the trust assets are more than the trust s available nil rate band at that time. If you put an OEIC into trust after it has been issued to you, there may be capital gains tax to pay if it has risen in value since it was issued to you. You will not be able to postpone this tax through hold-over relief if any child or stepchild of yours under 18 (who is neither married nor in a registered civil partnership) is a beneficiary of the trust. There may be capital gains tax to pay if trust assets are cashed in, sold or transferred to beneficiaries. If any child or stepchild of yours under 18 (who is neither married nor in a registered civil partnership) is a beneficiary of the trust, then you will be liable for any capital gains tax, though you are entitled to reclaim tax you have paid from the trustees. The trustees will pay income tax on any income arising in the trust at special trust rates of tax. If income is paid out to a child or stepchild of yours under 18 (who is neither married nor in a registered civil partnership) it will be taxed as your income, though you are entitled to reclaim tax you have paid from the trustees. No beneficiary under the trust should pay any money into this trust and, in single settlor cases, any payments into the trust should be paid from an account in the settlor s sole name. If there is more than one settlor, a record should be kept of who has provided what, as the trustees will require this so that they may properly assess the tax payable in respect of the trust. If two people A and B each create a trust on the same day, and if A is a beneficiary of B s trust and vice versa, these may be regarded as creating gifts with reservation and so be ineffective for IHT planning. If either you or your spouse or registered civil partner is not domiciled in the United Kingdom, the tax rules explained above may not apply to you, and you should take advice from your solicitor or accountant. Please note that tax rules can change. The above guidance is in outline only, based on our understanding of the relevant legislation at the date of going to print. If you have any doubts or queries about the tax consequences of setting up the trust or the taxation of the trust you should take advice from your solicitor or accountant. 2

4 IF YOU WOULD LIKE TO PLACE YOUR OEIC UNDER TRUST, PLEASE; Fill in the deed and return it to us. This will tell us Who you want the funds to go to, and Who you want to act as trustees. You and your appointed trustees need to sign the form. Your signatures have to be witnessed by someone who is neither a beneficiary nor a trustee. We will register the trust and return the original deed to you. You should keep this deed in a safe place. This deed of trust is made between: About you: Please enter your name and address. 1st Settlor Name Address AND 2nd Settlor (if any) Name Address (the Settlor which expression shall, where two persons are named above, include both of them) of the one part and the Settlor and Who do you want to be trustees with you?: Please enter the name(s), address(es) and date(s) of birth of the additional trustee(s). 1st Additional Trustee Name Address Date of birth (DD MM YYYY) Nationality (list all if more than one held) (e.g. British, French, Irish) Town/city of birth Country of birth Country of residence (if other than the UK) Country of any residential addresses Which countries are you tax resident in? By TIN, we mean your Taxpayer Identification Number or similar tax payer reference you hold for countries you are tax resident in. Please provide your TIN: 3

5 2nd (if any) Additional Trustee Name Address Date of birth (DD MM YYYY) Nationality (list all if more than one held) (e.g. British, French, Irish) Town/city of birth Country of birth Country of residence (if other than the UK) Country of any residential addresses Which countries are you tax resident in? By TIN, we mean your Taxpayer Identification Number or similar tax payer reference you hold for countries you are tax resident in. Please provide your TIN: WHAT ASSETS DO YOU WANT TO GIFT INTO THIS TRUST? If your OEIC is already in force, please give the name of the fund(s) you are invested in and the reference number. OEIC Reference Number: OR If your OEIC has not yet been issued, please state the date of your application and the amount of your initial investment: Date of application: Amount to be invested: If, after the date of this trust, you invest any more money in the OEIC(s) described above or issued pursuant to the application described above, Scottish Widows Unit Trust Managers Ltd will issue shares in the OEIC(s) to the trustees to hold as part of this trust. 4

6 You should name at least one beneficiary here. You cannot include yourself or your spouse or registered civil partner [or your estate or legal personal representatives in their legal capacities] amongst the Default Beneficiaries. THERE MAY STILL BE MONEY OR ASSETS IN THE TRUST WHEN IT COMES TO AN END. WHO WOULD YOU LIKE THE TRUSTEES TO PAY IT OUT TO AND IN WHAT SHARES? (THESE BENEFICIARIES ARE KNOWN AS THE DEFAULT BENEFICIARIES ) You cannot include yourself or your spouse or registered civil partner [or your estate or legal personal representatives in their legal capacities] amongst the Default Beneficiaries. 1st Beneficiary Name Address Date of birth (DD MM YYYY) Relationship to Settlor if any Nationality (list all if more than one held) (e.g. British, French, Irish) Town/city of birth Country of birth Country of residence (if other than the UK) Country of any residential addresses Which countries are you tax resident in? By TIN, we mean your Taxpayer Identification Number or similar tax payer reference you hold for countries you are tax resident in. Please provide your TIN: 2nd Beneficiary Name Address Date of birth (DD MM YYYY) Relationship to Settlor if any Nationality (list all if more than one held) (e.g. British, French, Irish) Town/city of birth Country of birth Country of residence (if other than the UK) Country of any residential addresses Which countries are you tax resident in? By TIN, we mean your Taxpayer Identification Number or similar tax payer reference you hold for countries you are tax resident in. Please provide your TIN: 5

7 3rd Beneficiary Name Address Date of birth (DD MM YYYY) Relationship to Settlor if any Nationality (list all if more than one held) (e.g. British, French, Irish) Town/city of birth Country of birth Country of residence (if other than the UK) Country of any residential addresses Which countries are you tax resident in? By TIN, we mean your Taxpayer Identification Number or similar tax payer reference you hold for countries you are tax resident in. Please provide your TIN: First beneficiary Second beneficiary Third beneficiary Share (%) Please ensure the shares add up to 100%. Total 100% The stated shares should add up to 100%. If they do not add up to 100%, they shall be taken as being scaled up or down in the same proportion so that they do. 6

8 While the trust is in being, the trustees can choose who benefits from the assets from a range of beneficiaries (the Possible Beneficiaries ). The exclusion of the settlor s estate and the settlor s legal personal representatives does not mean that people included in these categories cannot benefit in their personal capacities. Your widow, widower or surviving registered civil partner is included in the list and may be a Possible Beneficiary after your death, unless he/she is also a settlor of this trust in which case he/she cannot benefit. b) includes your children In h), you can name anyone not included by a) g), except yourself or your spouse (or registered civil partner). The trust is governed by the law of England and Wales, unless the Settlor (both of them if there are two) initials the box(es), in which case the law of Scotland will apply. THE POSSIBLE BENEFICIARIES a) The parents of the Settlor; b) Any children (except the Settlor) and remoter issue of the parents of the Settlor and their respective spouses or registered civil partners; c) The widows, widowers and surviving registered civil partners (even if married or in a registered civil partnership) of the children and remoter issue of the parents of the Settlor; d) The widow(er) or surviving registered civil partner of the Settlor; e) The Default Beneficiary(ies); f) Anyone whom the Settlor nominates in writing to the Trustees. Where there is more than one Settlor, this power of nomination shall be exercisable by them jointly during their joint lives and thereafter by the survivor; g) Anyone who may benefit from the estate of the Settlor or the estate of a Default Beneficiary; and h)... But always excluding the Settlor; the Settlor s spouse or registered civil partner for the time being; and [the Settlor s estate and the Settlor s legal personal representatives in their legal but not their personal capacities] (the Excluded Persons ). Children and Issue include any illegitimate, step, adopted or legitimated children and issue. WHAT LAW DO YOU WANT TO APPLY TO THIS TRUST? The proper law of this Trust shall be that of England and Wales and all rights under this Trust and its construction and effect shall be subject to the jurisdiction of and construed according to the laws of England and Wales, unless the box incorporated in this section is initialled by the Settlor, in which case the proper law of this Trust shall be the law of Scotland and it will be construed accordingly. Initials of 1st Settlor where Scots law is to apply Initials of 2nd Settlor (if any) 7

9 TRUST PROVISIONS 1. The Settlor declares that from the date of this Trust the Investment is held upon the trusts and subject to the powers and provisions set out below and declares that any further investment made by the Settlor to the Investment will be held upon the trusts and subject to the powers and provisions set out below. 2. Where the Investment has already been acquired by the Settlor, the Settlor appoints the Additional Trustee(s) to act jointly with him as trustees of this Trust, and the Settlor undertakes to transfer the Investment to the Trustees to be held by them as trustees of this Trust. 3. Where the Investment has not yet been acquired by the Settlor, the Settlor appoints the Additional Trustee(s) to act jointly with him as trustees of this Trust and the Settlor directs Scottish Widows Limited to issue the Investment to the Trustees to be held by them as trustees of this Trust. 4. The Additional Trustee(s) accept their appointment as trustees of this Trust. 5. The Trustees (being or including either a trust corporation or two persons, at least one of whom is not an Excluded Person) may at any time or times during the Trust Period exercise a power of appointment over the whole of the Trust Fund, or over any part or parts of it or over any share or shares in it, for the benefit of any one or more of the Beneficiaries. 6. The following rules apply to every appointment made under the above power: a) it must be made by deed; b) it may create any trusts, powers or interests, including discretionary trusts, dispositive powers and administrative powers. Any such trust, power or interest may be executed or exercised by any person; c) it may be revocable, but only during the Trust Period, or irrevocable; d) no appointment shall benefit any of the Excluded Persons; e) neither an appointment, nor any revocation of a revocable appointment, shall prejudice or invalidate any payment or application of funds previously made. 7. In default of, and subject to and until any exercise of the power of appointment conferred upon them above, the Trustees shall during the Trust Period pay or apply the income of the Trust Fund as it arises to or for the maintenance, education, advancement or benefit of any one or more of the Beneficiaries for the time being in existence, in such manner generally, and, if there is more than one Beneficiary, in such shares as the Trustees shall from time to time think fit. 8. Notwithstanding the above provision concerning income, the Trustees may, during the Accumulation Period, accumulate the whole or any part or parts of the income of the Trust Fund by investing it, and the resulting income, in any of the investments authorised for the purposes of this Trust. The Trustees shall hold all such accumulations of income as part of the capital of the Trust Fund for all purposes. However, the Trustees may at any time or times during the Trust Period pay or apply accumulations of income to or for the benefit of any one or more of the Beneficiaries as if it was income arising in the then current year. 9. The Trustees may, at any time or times during the Trust Period, pay or apply the whole or any part or parts of the Trust Fund to or for the advancement or benefit of any one or more, or all, of the Beneficiaries for the time being in existence, in such manner generally as the Trustees shall from time to time think fit. 10. Subject to the trusts, powers and provisions set out above the Trustees shall hold the Trust Fund for the Default Beneficiaries in the shares specified or, if no shares are specified, in equal shares (or, if only one Default Beneficiary is specified, for that Default Beneficiary). 11. Section 31 of the Trustee Act 1925 shall not apply. Section 32 of the Trustee Act 1925 shall apply with the following modification: The words one-half of in section 32(1) (a) shall be deleted. 8

10 TRUST PROVISIONS (CONTINUED) 12. Notwithstanding anything else in this Trust, no power conferred by this Trust shall be exercisable, and no provision of it shall operate, so as to allow any property comprised in the Trust Fund, or any income from the Trust Fund to become payable to any of the Excluded Persons in any circumstances whatsoever (other than in a purely parental, or purely fiduciary, capacity) or to become applicable for the benefit of any of the Excluded Persons in any circumstances whatsoever. This clause shall not preclude the Settlor (and where there is more than one Settlor, either of them) from exercising any statutory right to claim reimbursement from the Trustees for any tax paid by him in respect of income arising to the Trustees or any gains realised or deemed or treated as realised by them. The trustees have wide powers of investment and sufficient powers to manage and deal with the trust property. 13. The Trustees shall have all the powers of an absolute beneficial owner in dealing with, investing and managing the Trust Fund, including the power to delegate the investment of the Trust Fund on a wholly discretionary management or other basis. None of the express powers conferred below shall be taken as excluding, restricting or limiting these powers. 14. The Trustees may surrender, deal with or invest the Trust Fund in any income or non-income bearing investments, or property which they in their absolute discretion think fit. The Trustees may put or leave an asset in the name of a nominee and may deposit documents with any person. The Trustees may decide not to diversify the Trust Fund. 15. The Trustees have the power to borrow on such terms as they think fit, and to use the Trust Fund as security for such borrowing. The trustees are responsible for putting a suitable loan agreement in place, if they use the power in The Trustees may lend all or any part of the Trust Fund, with or without security or interest, to any Beneficiary, and may charge funds as security for any debt or other liability of any Beneficiary upon such terms as the Trustees think fit. In addition the Trustees may guarantee any debt or obligation of any Beneficiary, may resort to the Trust Fund to meet any liability under any such guarantee, and may charge all or any part of the Trust Fund as security for any such guarantee. 17. The Trustees may permit a Beneficiary to occupy a house, flat or other dwelling as a residence, or to enjoy a chattel, on such terms as they think fit. 18. The Trustees may appropriate any part of the Trust Fund in or towards satisfaction of the interest of any of the Beneficiaries without the need for any consent. 19. The Trustees may pay or transfer any asset comprised in or any income of the Trust Fund to the parent or guardian of any Beneficiary who is under 18 years old and to whom they have an obligation or discretion to pay such asset or income, and the receipt of such parent or guardian shall be a full discharge to the Trustees. Professional trustees can charge for any work carried out for the trust. 20. Any Trustee (other than the Excluded Persons) being a solicitor or other person engaged in any profession or business, shall be entitled to be paid professional fees for business transacted, time spent, and acts done by him or any employee or partner, including acts which a Trustee could have done personally, as may be agreed with the other Trustees before such work is carried out, without prejudicing his right to resign as if he were a gratuitous trustee. 21. Any company authorised to conduct trust business may be appointed a Trustee of the Trust Fund, and on appointment shall have the rights to remuneration and charges as may be agreed in writing prior to or upon appointment. 22. During his life, the Settlor may from time to time by deed: a) remove or add any person excluding himself as a Default Beneficiary provided that there shall at all times be at least one Default Beneficiary remaining, b) alter the shares of the Default Beneficiaries specified on page 4, c) appoint new or additional Trustees; and d) remove any Trustee, provided that the Trustees remaining after the removal are or include either a trust corporation or two persons, at least one of whom is not an Excluded Person. After the death of the Settlor (or the surviving Settlor, if more than one), the Trustees shall have the power to appoint by deed new or additional trustees. Where there is more than one Settlor, this power shall be exercisable by them jointly during their joint lives and thereafter by the survivor. Trustees resident in any part of the world may be appointed and the administration of this Trust may be carried on in any part of the world. 9

11 TRUST PROVISIONS (CONTINUED) Trustees can retire from their trust duties. 23. A Trustee may retire at any time by deed notified to the other Trustees, provided that no retirement of any Trustee shall take effect unless and until the continuing Trustees are or include at least two persons, at least one of whom is not an Excluded Person. 24. Any Trustee not being a sole trustee may exercise or join in the exercise of any power or discretion conferred on the Trustees by this Trust or by law notwithstanding that he may have a direct or other personal interest in the mode or result of exercising it, and the Trustees (not being fewer than two in number or a corporate trustee) may in their absolute discretion validly effect a transaction concerning any part of the Trust Fund or its management notwithstanding that any of the Trustees are in either a personal or a fiduciary capacity the other party or one of the other parties to the transaction. 25. A Trustee shall not be liable for any loss to the Trust Fund unless that loss is caused by his own fraud or wilful neglect or default; or additionally in the case of a Trustee who is remunerated for his services as such, by his own negligence. Any liability of a Trustee shall be restricted to liability arising from his own actions or omissions only. 26. Any legal rule requiring apportionments to be made for the purpose of this Trust is excluded and shall not apply. 27. The Trustees may utilise any income arising from or capital of the Trust Fund to pay any tax liability. 28. The Trustees may, at any time or times by deed revocable during the Trust Period or irrevocable, release, extinguish or restrict any or all of the powers conferred upon them by this Trust (including this power) and the Settlor may, at any time or times by deed revocable during the Trust Period or irrevocable, release, extinguish or restrict any or all of the powers conferred upon him by this Trust (so that where there is more than one Settlor, this power shall be exercisable by them jointly during their joint lives and thereafter by the survivor). 10

12 DEFINITIONS Terms frequently used in the trust and not already defined above are defined here. In this Trust the following definitions shall apply: Accumulation Period means the period commencing on the date of this Trust and expiring on the twenty first anniversary of that date. Beneficiary means anyone who is a Default Beneficiary or a Possible Beneficiary and Beneficiaries is to be read accordingly. Registered civil partnership means a civil partnership which exists under or by virtue of the Civil Partnership Act 2004 and any reference to a civil partner is to be read accordingly. Investment means whichever of the following shall apply: a) the Scottish Widows OEIC(s) to be acquired pursuant to the application (if any) shown on page 4 of this Trust; b) the Scottish Widows OEIC(s) shown on page 4 of this Trust. Settlor means the person or persons named as Settlor on page 3 of this Trust, and where there is more than one person named as Settlor any reference to the parents, spouse, civil partner, widow, widower, surviving civil partner [or] estate [or legal personal representatives] of the Settlor shall be a reference to the parents, spouse, civil partner, widow, widower, surviving civil partner [or] estate [or legal personal representatives] of either of them. Trust Fund means the Investment together with any further investment or assets added by way of further settlement, capital accretion, accumulation of income, or otherwise, and all assets from time to time representing the same. Trust Period means the period of 79 years from the date of this Trust, which period (where the proper law of this Trust is the law of England and Wales) shall be the perpetuity period. Trustees means the Settlor and the Additional Trustee(s),or the trustee or trustees for the time being of this Trust, and Trustee means any one of them. 11

13 IMPORTANT NOTE The parties to this deed must not witness each other s signature The same independent witness may witness all the signatures. Signed as a deed and delivered on By 1st Settlor Your name Your signature Date (DD MM YYYY) Name of witness Signature of witness Address of witness 2nd Settlor (if any) Your name Your signature Name of witness Signature of witness Address of witness 1st Additional Trustee Name of 1st additional trustee Signature of 1st additional trustee Name of witness Signature of witness Address of witness Please return this form, fully completed, signed by everyone named in this deed and witnessed, to: Scottish Widows Limited, 15 Dalkeith Road Edinburgh EH16 5BU 2nd Additional Trustee (if any) Name of 2nd additional trustee Signature of 2nd additional trustee Name of witness Signature of witness Address of witness 12

14 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /15