Vulnerable Persons Trust Election
ruthiebusybee
Member
Hi all
We have a client with a GIA with a Vulnerable Persons election on it. This was mainly funded by the parents (who are trustees), but the VP also settled some of their own money into it.
The trustees (their parents) want to move this to a bond, but the adviser is concerned that any withdrawals from the Bond would be taxed to the settlors (alive and in the UK). I suggest assignment of segments but they're concerned that capacity could be an issue in that instance.
Any thoughts/guidance?
Many thanks
Ruth
Ruth Baker
Comments
Why do they want to move it to a bond?
This would cross the threshold for specialist advice in my book, at which point any possible benefit to actual or perceived simplification of the investment and tax may be vastly outweighed by unintended complexity of administration and the costs of professional advice.
I’d be wary of changing a working structure around a vulnerable person without a clear, quantified advantage and legal/tax sign‑off.
As I understand it the VPE is only relevant where the trust would otherwise be liable. As this is presumably a discretionary trust (or no VPE would have been needed) then the settlors would be liable if they were alive and UK resident (including the VP as they are a settlor).
But this is complex and I agree with Benjamin might need a specialist tax and trust person. But to review the existing set up not just the potential new approach. There are a multitude of benefits of having the bond and it doesn't make running the trust any more complicated than administering a GIA within it.
The main problem is it appears to be settlor interested and I haven't a clue how a settlor interested trust with a VPE works.
I don't think the assignment is an issue as a) you could appoint instead or b) the deputy/guardian can "accept" the segment(s).