Place your future in experienced hands. Our Wealth Structuring team advise on a range of issues from estate and succession planning, charitable giving, retirement planning and protection and can help you navigate complexities in relation to buying UK real estate, cross-border planning, business exits and moving to the UK. The security, opportunity and responsibility your wealth brings often demands careful specialist advice.
Coutts has a comprehensive in-house Wealth Structuring team who work closely with you, your professional advisers and your Private Banker and Wealth Manager to navigate the complexities of structuring your affairs for the long term. . Whether you are an entrepreneur selling your business, an executive with complex share schemes, a non-UK domiciled individual living in the UK, you or your family members are considering relocating to the UK or you are simply looking to structure your affairs more effectively, Coutts Wealth Structuring has the expertise to add value to these discussions before you take action.
Coutts estate planning team offers bespoke advice on succession and inheritance tax issues. Preparing a suitable and tax efficient will is often the first step in an overall estate planning review. Wills are important not only to ensure that your assets will be passed on to your intended beneficiaries, but also, where appropriate, for legitimate tax planning and to provide protection for young and vulnerable.
Coutts have been dealing with estates, and the issues that arise in relation to them, for over 100 years. We are able to act as an executor of your will, bringing professional expertise to the administration of your estate and, with a detailed understanding of your personal circumstances, helping to protect assets for future generations. In addition to will planning, we will also advise you in connection with the structure of your estate including discussing the issues arising from jointly held assets, as well as providing you with an overall understanding of relevant inheritance tax planning options ranging from outright gifts to setting up trusts.
In all cases, our estate planning team will provide a service tailored to your particular needs.
In our experience many individuals do not consider establishing a trust as part of their wealth planning even though it can be an extremely effective tool. This tends to be for one of two reasons: some individuals feel that settling a trust will be too complex when in reality it can be a relatively straightforward process. Alternatively, many have heard that trusts are only appropriate for passing on extreme wealth but in fact many individuals establish trusts at sums at or below the Inheritance Tax (IHT) threshold (currently £325,000).
There are many reasons why a trust may be suitable. This could be to protect assets, to provide privacy or to ensure the smooth transition of assets to beneficiaries on death and avoid lengthy probate proceedings. Whatever the reason, our trust experts can advise whether a trust is appropriate to meet these objectives and then work closely with your Private Banker or Wealth Manager to ensure that you achieve your aims.
ADVANTAGES OF USING Coutts
Coutts has over 75 years' experience of establishing and managing trusts that meet the needs of wealthy individuals and families. Continuity in a trust's management is important and so Coutts is often appointed as Trustee.
SERVICES WE PROVIDE
- Establishing the trust including preparing the deed
- Regular meetings with co-trustees to deal with administrative matters
- Making distributions to beneficiaries
- Monitoring investment reports
- Dealing with all administration, accounting and tax reporting
Typical situations where a trust may be appropriate
Trusts are a useful tool in passing wealth on to the next generation. Parents could set aside sums up to their combined nil rate bands of £650,000 to provide funds for their children which could be used, for example, to assist in the purchase of their first property. By transferring this sum into a trust, the parents can start the 'seven year clock' for IHT purposes.
Likewise, grandparents may want to provide for their grandchildren's education by establishing a trust which could release monies to meet these future costs. Such trusts can provide directly for grandchildren whilst starting the 'seven year clock'. They also ensure that assets are passed to grandchildren without becoming chargeable to IHT in their children's estate first.
For individuals who have a substantial sum that they wish to invest for charitable and philanthropic purposes a charitable trust can be a highly effective and very rewarding means of providing long-term support for the causes that matter most to them. A charitable trust can continue in perpetuity and evolve over time with the donor and, or, family members becoming trustees and being involved in grant-making decisions. Coutts Trust team works closely with our dedicated Philanthropy team to ensure that individuals' charitable objectives are understood and achieved.
A trust can be used to ring-fence sums for individuals who may not be in a position to receive the assets outright perhaps because of their age or personal situation.
Trusts can also be used in some insurance based arrangements to provide potential IHT benefits and flexibility for individuals who wish to settle money on trust but retain some access to part of the funds.
There are three main phases in planning for retirement. At Coutts, we will work with you through all phases of your retirement planning, reviewing your arrangements whenever your circumstances change, to ensure that you achieve the comfortable retirement that you had planned.
- Pre-retirement: ensuring you have sufficient funds for a comfortable retirement in the most tax efficient way. This also involves making your assets grow effectively and this could be by looking at where it is invested, especially if you hold older, smaller pension arrangements
- At retirement planning: reviewing the options available to you and help you to plan the most appropriate and tax effective solutions to meet your objectives
- Post retirement planning: helping you to plan whether to delay taking pension benefits and optimising the phasing of the benefits to meet your specific income requirements
Further changes to pensions legislation with effect from 6 April 2016
From 6 April 2016, the maximum amount that can be paid into a pension on a tax-efficient basis each year (the Annual Allowance) will be reduced for individuals with high incomes, on a tapered basis. This will affect individuals with income (including the value of any pension contributions) of over £150,000 and who have an income (excluding pension contributions) in excess of £110,000. The standard Annual Allowance, which for most individuals is currently £40,000, will be reduced by £1 for every £2 that income (including the value of any pension contributions) exceeds £150,000, up to a maximum reduction of £30,000. (The term income also incorporates non-earned income, such as investment income and rental income, for example.)
Whether an individual will be affected by this change depends on their level of income each year and the value of all the benefits accrued in all their pension arrangements on an annual basis after 6 April 2016, which will include any contributions being made by an individual or anyone else and also the value of any benefits being built up in defined benefit schemes - often known as "final salary" schemes.
From 6 April 2016, the maximum total value that can be accumulated in pension arrangements on a tax efficient basis (the Lifetime Allowance) will be reduced from £1.25 million to £1 million. This Lifetime Allowance limit applies across all pension plans, including company schemes. Any total value built up over £1 million will be subject to a tax charge of up to 55%.
Whether an individual will be affected by this change depends on what pension savings have already been built up and the level of future contributions.
An individual will not need to take any action in respect of the Lifetime Allowance change if all of the following are satisfied:
- A registration has been made with HMRC for Enhanced Protection, Primary Protection, FixedProtection 2012, or Fixed Protection 2014, and
- Protection has not been lost (for example by accruing further pension benefits or making a contribution after the effective date of the protection), and
- There is no intention to make any pension contributions or join a pension scheme in the future
If no previous registration with HMRC has been made for Enhanced or Primary Protection, Fixed Protection 2012 or Fixed Protection 2014 (or protection previously applied for has been lost) and there are pension savings now or savings that could potentially be worth over £1 million at retirement, an individual may be able to apply for a new form of protection called Fixed Protection 2016. This will allow the current lifetime allowance limit of £1.25 million to be maintained.
An individual applying for Fixed Protection 2016 will need to stop paying contributions from 6 April 2016 by cancelling any direct debits and standing orders to all pension arrangements. An individual may also need to discuss the necessary changes to any defined benefit arrangements with the scheme administrator prior to this date.
An individual may also apply for a different type of protection, called Individual Protection. Individual Protection will protect the value of pension savings at 5 April 2014, up to £1.5m (Individual Protection 2014), or at 5 April 2016, up to £1.25m (Individual Protection 2016). Individual Protection 2014 is available until 5 April 2017. Individual Protection 2014, in particular, may protect more than can be protected by Fixed Protection 2016. An individual does not need to stop accruing pension benefits if they register for Individual Protection and they may register for this in addition to Fixed Protection.
The Taxation of Pensions Act brought about a number of significant changes effective from 6 April 2015
The concept of ‘flexi-access drawdown’ is introduced and under this approach there will be no cap for those at minimum pensionable age (currently age 55, rising to age 57 in 2028) and beyond on the amount of funds that can be withdrawn, nor will there be a minimum withdrawal requirement, although the 25% tax-free lump sum amount will remain available. Those with existing capped drawdown arrangements can convert their fund to a flexible drawdown fund in order to take higher withdrawals. Apart from the tax free lump sum all withdrawals are taxable at an individual’s highest marginal tax rate.
A UFPLS is another completely new way to access pension benefits. Money is withdrawn as and when needed and 75% of each payment is taxable at the individual’s’ marginal rate of tax and 25% is tax-free.
A new lower annual allowance for pension contributions is introduced, known as the money purchase annual allowance (MPAA). Where an individual has flexibly accessed their pension savings, a restricted £10,000 annual allowance will apply to their future money purchase pension savings and any contributions to money purchase pensions over this amount will not attract tax relief.
Individuals with a drawdown arrangement or with un-crystallised pension funds will be able to nominate a beneficiary to pass on any unused pension funds, on their death, that will allow those funds to be used to provide a drawdown pension or pay a lump sum death benefit. In addition, any beneficiary (whether a dependant or otherwise) with unused drawdown funds on their subsequent death can also pass those funds to a further successor to provide a drawdown pension or pay a lump sum death benefit to that individual.
If the individual dies before they reach the age of 75, they will be able to leave their remaining defined contribution pension to anyone they choose as a lump sum completely tax free, providing this occurs within (broadly) two years of death. The person receiving the pension will pay no tax on the money they withdraw from that pension, whether it is taken as a single lump sum or accessed through drawdown.
Anyone who dies with a drawdown arrangement or with uncrystallised pension funds at or over the age of 75 will also be able to nominate a beneficiary to pass their pension to. The person receiving the pension will be subject to a 45% tax charge on any lump sum withdrawal. However, if the recipient makes partial withdrawals from the fund, they will be subject to income tax at their marginal rate.
For lump sums paid on or after 6 April 2016, the stated intention is that the charge will be levied at the recipient’s marginal tax rate.