MORE INFORMATION TAX AND TRUSTS

Collective investment vehicles
Allow trustees as investors to pool their money into a single fund managed by a professional. They can provide great diversification of risk and a range of risk and reward profiles. Other benefits are:

Dealings within such funds are exempt from capital gains tax.

Investing in a portfolio of collectives means trustees can spread risk further by investing in a number of such funds and so avoid relying overly on one fund manager. But how do trustees monitor such managers? A solution is…

Fund of Funds vehicles

They give trustees even greater diversification and reduction of risk. An example is that from F&C – see below. This is a fund that invests in 20 to 25 other collective funds. Here a service like that from F&C can help trustees gain the ultimate in diversification - between asset classes, markets, sectors and managers. Hence, this service is an ideal core holding for trusts. Benefits include the CGT efficiency of collectives, magnified by an ability to move between different fund managers, without triggering chargeable events and all at institutional (lower) cost.

The F&C Portfolio Service

Is quite often used by us for trustee investments for a number of reasons.

It offers investment protection via a contingent life assurance that requires no individual underwriting/health questions of the settlor. This protects the original trust investment (up to a shortfall sum of £150,000) if its value falls below its initial level, due to stock market falls, leading up to the settlor’s death. This helps to deal with “suitability” aspect.

There are 4 funds of funds portfolios offered, two of which are lower risk, one is medium risk and one is higher risk. Any combination of these can be taken so as to create a “suitable trust profile”.

There is constant monitoring of the portfolio to ensure it performs in line with expectations. It also incorporates two free switches a year, so allowing trustees to change holdings if the trust’s risk profile is to change. This helps guard against “failing to monitor investments”.

Gives tax efficient access to leading collective funds.

Includes a regular capital withdrawal facility, allowing trustees the ability to advance monies to beneficiaries tax efficiently.