Guide to paying your professional adviser Estate planning

Transcription

1 Guide to paying your professional adviser Estate planning

2 Introduction This guide is to help explain the ways in which you or the trustees can ask Canada Life to deduct money from its range of estate planning solutions, to pay your adviser. In this guide, reference to Canada Life includes both the onshore and offshore companies (they are Canada Life Limited (CLL), Canada Life International Limited (CLI), CLI Institutional Limited (CLII) and Canada Life International Assurance Limited (CLIA)). Types of adviser deductions There are different deductions available, depending on the services being provided. Adviser charging Once you have agreed the fees for any advice and services provided to you, either initially or on an ongoing basis, you can either pay this direct to the adviser or request Canada Life to facilitate payments from a product. The options available will depend on the product. An initial deduction can be taken before your money is applied to an Account. Any initial deduction taken after applying the money to an account or ongoing and single deductions/payments, are treated as a partial surrender/withdrawal. The following Canada Life products and trusts are covered by this guide and include the following adviser charge options: Product Initial adviser charge Ongoing adviser charge Single/Ad hoc adviser charge Discounted trust accounts Wealth Preservation Account Wealth Preservation Europe Account Controlled Access Account We also explain what happens when an existing Canada Life policy is put into trust (please see the change of ownership under an existing Bond or Account on page 5). Fund adviser fees Where you or the trustees nominate a fund adviser and this nomination is accepted by Canada Life, fees to the fund adviser can be paid on quarterly basis, based on the value of the Account the deductions are being made from. This fee must be solely in respect of advice regarding the assets being held in the Account. On this basis, the payments will not be treated as a partial surrender/withdrawal. The cost of advice or services in any other area must be paid through adviser charge deductions and not through a fund adviser fee. Discretionary investment manager fees Some products allow the appointment of a discretionary investment manager to act as custodian and manage a portfolio on a full discretionary basis. The fees for this will not be treated as a partial surrender/withdrawal. The deductions must be in respect of the discretionary service being provided. The cost of advice in any other area must be paid through adviser charge deductions. 2 Guide to paying your professional adviser Estate planning

3 Initial adviser charge Due to the nature of the trust structures any initial adviser charge must be deducted before any investments are made. Therefore the amount being invested will be the payment you send to Canada Life less any initial adviser charge deduction requested. Payment Adviser charge Bond/Account You make a payment to Canada Life as recommended by your professional adviser Canada Life deducts the amount you request This is paid to your professional adviser The remaining amount is invested into your Bond or Account The amount deducted can be expressed as a percentage of the investment or as a monetary amount and can only be made at outset. Ongoing adviser charges If any ongoing services are agreed between the trustees and a professional adviser then the trustees can instruct Canada Life to deduct regular amounts and pay these directly to the adviser. These requests can be made at outset by using the application form or anytime afterwards by using the relevant form. Company Reference Description CLL 5205 Adviser charge request CLI/CLII 6995 Starting or changing adviser charge deductions CLIA CLIA33 Starting or changing adviser charge payments The amounts can be stopped, started or varied and the trustees will need to specify the following information: A start date for when payments are to begin, this can be immediate or on a specific date. How long the payments are required for, either until further notice, for a specific duration or to a specific end date. The amount to be deducted as a percentage of the value or as a monetary amount. The frequency of payments, whether the amounts are to be deducted monthly, quarterly, half yearly or yearly. For our offshore products, monthly payments can only be made if you have specified a monetary amount. Any deductions will form part of the 5% tax deferred yearly allowance available to the trustees. If this allowance is exceeded then a tax charge may arise on the settlor, trustees or beneficiaries. This should be discussed with your professional adviser. If the original investor (settlor or donor) pays an ongoing adviser charge on behalf of the trustees then this could be classed as a further gift for inheritance tax (IHT) purposes. Guide to paying your professional adviser Estate planning 3

4 Single/ Ad hoc adviser charges These are only available under both the Wealth Preservation Account and Wealth Preservation Europe Account and will be treated as a withdrawal counting against the 5% tax deferred yearly allowance. If this allowance is exceeded then a tax charge may arise on the settlor, trustees or beneficiaries. This should be discussed with your professional adviser. If the original investor (settlor or donor) pays a single/ad hoc adviser charge on behalf of the trustees then this could be classed as a further gift for inheritance tax purposes. Estate planning products Discounted Trusts Accounts (Delta, Dimensions Preference, Premiere Alpha and Premiere Europe Discounted Trust Accounts) 4 Initial adviser charge The person who receives the advice to invest in a discounted trust account is able to request an initial adviser charge deduction The deduction will be taken from the amount paid to Canada Life before any investment in the product (if required) 4 Ongoing adviser charge The trustees are able to request an ongoing adviser charge be deducted from the product If the income payments plus the ongoing adviser charge exceed 5% of the original investment amount then a tax charge may apply 8 Single/Ad hoc adviser charge Single/Ad hoc adviser charges are not available from the discounted trust accounts Wealth Preservation Account and Wealth Preservation Europe Account 4 Initial adviser charge The person(s) who receives the advice to invest in the Wealth Preservation Account/Wealth Preservation Europe Account is able to request an initial adviser charge deduction The deduction will be taken from the amount paid to Canada Life before any investment in the product (if required) 4 Ongoing adviser charge The trustees (of the initial trust and discretionary settlement) are able to request an ongoing adviser charge be deducted* 4 Single/Ad hoc adviser charge The trustees are able to request a single/ad hoc adviser charge be deducted* * If any ad hoc adviser charges plus ongoing adviser charges paid in a single policy year exceed 5% of the investment amount then a tax charge may apply 4 Guide to paying your professional adviser Estate planning

5 Controlled Access Account 4 Initial adviser charge The person(s) who receives the advice to invest in the Controlled Access Account is/are able to request an initial adviser charge deduction The deduction will be taken from the amount paid to Canada Life before any investment in the product (if required) 8 Ongoing adviser charge Ongoing adviser charges are not available from the Controlled Access Account 8 Single/Ad hoc adviser charge Single/Ad hoc adviser charges are not available from the Controlled Access Account Change of ownership under an existing Bond or Account Where there is an existing Bond or Account being transferred or assigned to a trust then any existing ongoing adviser charge instruction will be cancelled. This is because the legal ownership of the Bond or Account is being changed and the existing instruction becomes invalid. The new owner or owners (such as trustees or assignees) will have to make a new instruction for an ongoing adviser charge to start (single/ad hoc adviser charges may be available as explained earlier). Trustee investments in onshore and offshore investment policies Where the trustees are investing, such as under a gift and loan trust or an existing trust investing, the trustees will generally be receiving the advice to invest and therefore they can request an initial adviser charge, either before or after investment in the product. In this instance we cannot facilitate payments in respect of any advice or service provided to the settlor. Please refer to either the Guide to paying your professional adviser onshore (reference MKT648) or the Guide to paying your professional adviser offshore (reference 6993) depending on which product the trustees are investing in. Guide to paying your professional adviser Estate planning 5

6 Minimum and maximum limits Where an ongoing adviser charge is being requested as a percentage of the value the trustees can set a minimum or maximum amount to be deducted, irrespective of the value of the investment. This is particularly useful for those requesting an ongoing adviser charge from a discounted trust account. Example The trustees request a 1% ongoing adviser charge deduction each year with a maximum amount of 1,000 and a minimum amount of 500. If the value of the investment is 110,000 the percentage based figure is 1,100, however as a maximum of 1,000 applies we will limit the payment to 1,000. If the value of the investment is 45,000 the percentage based figure is 450, however as a minimum of 500 applies we will deduct 500. Where an income is being taken from the investment this facility can help reduce the likelihood of the withdrawals exceeding the 5% tax deferred yearly allowance. Cancellation notice If we have been asked to make any adviser charge deductions and the policy owner returns the cancellation notice within the initial 30 day cancellation period, we will be unable to refund any payments which we have made to the professional adviser. You should speak to your professional adviser regarding this. Taxation There may be tax implications for any adviser charge deduction and it is important you discuss these with your professional adviser. Income tax Life assurance policies have a 5% tax deferred yearly allowance which is explained in the relevant key features document and the client guide. The use of ongoing and single/ad hoc adviser charge deductions (where available) will affect this allowance. If this allowance is exceeded then a tax charge may arise. This could fall due on the creator of the trust, the trustees or the beneficiaries. For trust investments, should any of the underlying policies be surrendered or reach maturity then any ongoing and single/ad hoc adviser charge deductions will be factored in the income tax calculations. Inheritance tax If the creator of a trust pays a fee on behalf of the trustees then this may be classed as a gift for IHT purposes. If the trustees pay a fee for advice provided to the creator of the trust, then this could compromise the effectiveness of any trust arrangement as in most instances the creator of the trust should not be able to benefit from the trust assets. 6 Guide to paying your professional adviser Estate planning

7 VAT The service an adviser provides and the fees charged are a matter for the adviser and their client, whether this is an individual or trustees. The adviser charge options available from Canada Life are designed to allow us to facilitate a payment on behalf of the client, settlor or trustee. The VAT status of the fees does not affect the adviser charge deductions made from an investment and we cannot administer any requests to include or exclude VAT. Further information For more information regarding Canada Life s range of adviser charging options, please contact your professional adviser. Before considering or asking us to facilitate any adviser charge deduction you should discuss the implications of the request with your professional adviser to make sure that any tax implications are identified. This guide is based on Canada Life s understanding of relevant legislation as at October 2014 which may alter and depends on the financial circumstances of the client. We recommend you take your own professional tax advice. Guide to paying your professional adviser Estate planning 7

8 Canada Life Limited, registered in England no Registered office: Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Telephone: Fax: Member of the Association of British Insurers. Canada Life International Limited, registered in the Isle of Man no Registered office: Canada Life House, Isle of Man Business Park, Douglas, Isle of Man IM2 2QJ. Telephone: +44 (0) Fax: +44 (0) Member of the Association of International Life Offices CLI Institutional Limited, registered in the Isle of Man no C. Registered office: Canada Life House, Isle of Man Business Park, Douglas, Isle of Man IM2 2QJ. Telephone: +44 (0) Fax: +44 (0) Member of the Association of International Life Offices. Canada Life International Assurance Limited, registered in Ireland no Registered office: Irish Life Centre, Lower Abbey Street, Dublin 1. Telephone: Fax: Member of the Association of International Life Offices. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Insurance and Pensions Authority. Canada Life International Assurance Limited is authorised and regulated by the Central Bank of Ireland. MKT R(C)