"I'm a trustee of an offshore bond. How can I withdraw funds tax efficiently?"
Helping a Trustee Navigate Tax Challenges to Access Offshore Bond Funds in Retirement
A client from North Wales was a trustee, alongside her mother, of an offshore investment bond held in a discretionary trust. The trust had been set up by her late father, who passed away two years ago. The client wanted to withdraw money from the trust fund, but encountered a major issue with the offshore bond provider who told her that the trustee tax rate on withdrawals was 45%.
The Challenge
Client: A lady from North Wales, a trustee of an offshore investment bond held in a discretionary trust.
Trust: The trust was set up by her late father, and she shares trusteeship with her mother.
Dilemma: How can she withdraw funds from the offshore bond without incurring the high 45% tax rate?
Key concern: How to access the funds in a tax-efficient way, particularly considering her upcoming retirement and lower income.
Our Approach
We examined the situation and presented an alternative solution that would help reduce the tax burden.
Option 1: The Immediate Withdrawal Approach
The initial information from the offshore bond provider would have resulted in a 45% tax rate on any withdrawals. While this option was available, it was not tax-efficient for the client, especially considering her long-term financial goals.Option 2: Transferring the Bond to the Client’s Name
We explained that the trustees could assign the offshore bond directly to the client, allowing her to take ownership of the bond. This would enable her to take withdrawals when she retired, a period in which her income would be significantly lower, thereby reducing the tax rate applied to the bond gains.
The Outcome
By explaining that the bond could be assigned to the client we helped her so that, upon retirement, she would be able to withdraw funds at a much lower tax rate. This is because her total income after retirement would fall within the basic tax rate of 20%. The bond’s gain, therefore, would be taxed at the reduced rate. We also assisted in gathering the necessary documents about the bond’s value and other documents to complete the assignment of the bond.
The client was extremely happy with the outcome of the meeting and has since enquired for further support with other matters.
*The case study provided is based on an individual circumstance and the outcomes are not necessarily applicable to everyone as personal situations differ. It is usually necessary to have a one-on-one meeting with a Money Guide to assess your unique situation. These examples are shared to illustrate the various areas where we can offer financial signposting and guidance.
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"Planned Future is the kind of financial guidance you always wanted but never knew existed. John helped me make crucial decisions about finances that protected my income and saved me on tax. But I also feel confident I can grow my financial knowledge on this journey and build my confidence to change my own money story"
"Planned Future is the kind of financial guidance you always wanted but never knew existed. John helped me make crucial decisions about finances that protected my income and saved me on tax. But I also feel confident I can grow my financial knowledge on this journey and build my confidence to change my own money story"
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