In bond we trust

KEY POINTS

• Insurance bonds held in trust raise new problems.
• Trustees’ tax position depends whether settlor can be charged.
• Income tax trap for income in possession trusts.

In my article just over a year ago (The name’s bond...) I discussed in detail many of the tax traps that exist when life assurance investment bonds are held directly by individuals.

Readers unfamiliar with the basic tax rules and practical issues associated with these bonds such as partial encashments bonds held in segmented form top slicing relief and deficiency relief may wish to refer to the previous article before reading this one.

When accountants come across an investment bond in practice it is just as likely that it will be held in trust as held by an individual directly. This results in a number of...