Unique Inheritance Tax mitigation scheme launched

Canada Life International has launched its new Wealth Preservation Account (WPA), designed to mitigate Inheritance Tax by allowing individuals to make a gift of capital whilst still retaining flexible, periodic access to cash if circumstances change.

This unique product is intended to be exempt from any income tax on pre-owned assets and outside the charge to capital gains tax, whilst minimising income tax and Inheritance Tax that may become payable in the future.

The WPA allows individuals to invest as much as they wish in a series of single premium life assurance policies, with a minimum investment of �50,000. These are settled on a bare trust and discretionary trust arrangement for a fixed term until they reach a known maturity date.

On day one, the legal title of the policies is assigned to an initial bare trust, and at the same time the individual settles all equitable rights under the policy on a discretionary settlement which comes into effect the following day. It is the division of legal title and equitable rights under the policy which is the important factor, ensuring that the whole arrangement is not caught by the charge to income tax on pre-owned assets.

Proceeds from the policies are available through a reversionary interest under the settlement, although the policies themselves can be extended should the maturities not be required by the individual.