Loan Trust for GIA

parawhat

Does anyone know if it's possible to write a General Investment Account into a loan trust or is there some specific aspect of loan trusts that mean only life assurance bonds can be used as the underlying wrapper?

I seem to remember Nucleus offered generic trust for GIAs, but not sure whether this included loan trusts.

Thanks

Jonny

richardgough

Loan Trust.
The loan is always cash, not an investment.
The trustees can then decide how to invest (and the most appropriate wrapper). So, yes, a GIA can be used as the subsequent investment vehicle.

parawhat

@richardgough thanks.

So, the next question... Does anyone know of any platforms that offer loan trusts that could be used in this way?

arongunningham

Why do we, by default, think of Investment Bonds for Loan Trusts? Because it's a non-income producing product, right?

Is it going to get untidy if you put the trust assets into a GIA?

richardgough

@parawhat
Loan Trust + GIA - absolutely any platform should offer this (assuming they can accept a trustee investment).

Transact can do this.

Jona

Depends on how the loan trust is set up - if bare/absolute then tax falls on the beneficiaries so GIA not a problem. If discretionary then you've got the whole relevant property regime and the taxation issues that presents and the bond wrapper keeps it simple (as it can be).

parawhat

@arongunningham said:
Why do we, by default, think of Investment Bonds for Loan Trusts? Because it's a non-income producing product, right?

Is it going to get untidy if you put the trust assets into a GIA?

Yes, it's the non-income producing nature of bonds which, as @Jona says, makes bonds so much more trust friendly as they're simpler to administer and manage for all parties concerned - no ongoing tax, no tax returns, ability to distribute 5% without being subject to income tax, no horrible tax pool calculations etc. There are potential exit charges with capital paid out of the trust on assignment of segments etc, but I've rarely seen any substantial tax as a result.

The reason I asked the question was more from theoretical perspective, but also because we've got a case with a client who is very anti-bond, so I just wanted to know whether GIA was even a possible option, which it looks like it is.

arongunningham

Is the client Auric Goldfinger?

benjaminfabi

I bet the client is more anti-tax than anti-bond @parawhat

GIA in a discretionary loan trust is a nightmare for everyone except the taxman

amarshall

@benjaminfabi said:
I bet the client is more anti-tax than anti-bond @parawhat

GIA in a discretionary loan trust is a nightmare for everyone except the taxman

And the accountant "recommending" that they don't use a bond in favour of using a GIA....

We have a similar case ongoing at the moment and I don't like it!

parawhat

@arongunningham said:
Is the client Auric Goldfinger?

@benjaminfabi Exactly. I'm sure they'll come around once the adviser explains the alternative.

@amarshall I do kind of get why accountants might be a bit wary when an IFA mentions 'bond' given all the previous flogging and churning of them that's gone on in the past, but if you were a cynic you could argue there's more work and £££ in it for them down the GIA route...