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Guide to Trusts

Guide to Trusts

Placing the HSBC Investment Bond in Trust

The HSBC Onshore Investment Bond can be placed in a new or existing Trust – as part of an estate planning strategy.

HSBC offer a range of Trusts

All are available on an absolute or discretionary basis and can invest in the HSBC Onshore Investment Bond. They are provided free of charge.

HSBC Gift Trust – capital can be placed in trust and this falls outside the client’s estate for Inheritance Tax provided the client lives for 7 years. The client has no access to money from the trust. The client would be a trustee of their Gift trust so would be able to exercise control over how the trust fund is invested and depending on the type of trust used, have control over when a beneficiary can benefit from the trust

HSBC Loan Trust – a cash sum is loaned to the trust, which is invested and any growth on that investment is outside the client’s estate for Inheritance Tax purposes. The client may take regular repayments of their loan to supplement their income. Any outstanding loan remains in the client’s estate on death for Inheritance Tax purposes.

HSBC Discounted Gift Trust – capital is placed in trust, part of which falls outside the Inheritance Tax estate provided the client lives for 7 years, and part should fall outside the estate immediately. The client retains access to regular payments from the trust during their lifetime or until the investment runs out. 

Features and Benefits

The HSBC Onshore Investment Bond provides Trustees with many potential benefits – including:
• Simple arrangement and administration.
• Tax efficiency.

Important information

It is not designed for non-taxpayers, non-UK residents and short-term (less than 5 years) investors. The value of investments can fall as well as rise and your client may not get back what they invested. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets. HSBC Life (UK) Limited cannot be held responsible for the investment performance of your client’s bond. The value of any tax benefits described depends on your client’s individual circumstances. Tax rules and rates may change in the future. HSBC Life (UK) Limited cannot be held responsible for any future changes in legislation.

Trustee Investment

Onshore Investment Bonds provide a number of potential benefits as trustee investments:

  • Simple administration. No tax returns or reporting/registration requirements unless a Chargeable Event arises
  • Onshore Investment Bonds are non-income producing so no ongoing income tax liabilities on the Bond holder until a chargeable event occurs
  • ‘Capital gains generated within the Bond is not subject to capital gains tax in respect of the Bond holder’
  • Income tax at the rate applicable to trusts of 45% can be deferred until encashment – with a 20% tax credit for UK Onshore Investment Bonds.
  • Scope to avoid tax at the rate applicable to trusts altogether where Investment Bond segments are assigned to basic rate/non taxpaying Beneficiaries to encash with reference to their own tax positions.
  • Tax on underlying UK funds at a maximum 20% rate – but potentially less with no additional tax payable on UK dividends and dividend distributions from unit trusts.
  • Trustee standard rate band is available if tax assessment falls on trust.

Multiple lives assured provides flexibility and Onshore Investment Bonds can continue until the last life assured dies.

  • Open Architecture Bonds empower Trustees to work with their Financial Advisers to construct a suitable investment portfolio for a Trust. Changes to risk profile and/or investment objectives can be accommodated without creating a Chargeable Event.

Trust Technical expertise

HSBC has a wealth of Trust experience to share. Our Taxation and Trust Manager has over 37 years’ experience dealing with tax and trust matters.

In addition, HSBC has partnered with Technical Connection to help us provide comprehensive support for financial advisers.

Useful Trust documents