Octopus Trust Builder

In 2006, the Government made some fundamental changes to the taxation of trusts, effectively closing what it saw as a loophole. This left discretionary trusts as the last remaining type of flexible IHT efficient trust. However, discretionary trusts are subject to a 20% upfront entry tax, called a ‘Chargeable Lifetime Transfer' (CLT).

Over the past few years, a number of financial advisers and investors have asked us to create a mechanism for funding flexible trusts without incurring this entry tax. In response to our customer's requests, we've created Octopus Trust Builder.

An innovative solution for trust planning

Octopus Trust Builder allows you to put money into a discretionary trust without paying the 20% entry tax. By first investing into a Business Property Relief (BPR) qualifying asset, holding this asset for the two year qualifying period and then transferring this asset into a trust, you are able to qualify for BPR related tax exemptions that eliminate the entry tax for trusts.

Key Benefits

• Ability to establish a discretionary trust without incurring the 20% CLT entry tax
• Investor retains control of and access to their investment
• Option to generate an annual income from the trust
• Access to a lower risk BPR qualifying investment via our Octopus ITS product
• Ability to preserve the client's inheritance tax nil rate band

Underlying Investments

Until recently, the only BPR qualifying assets easily accessible to non business owners were shares listed on the AIM market. Whilst some investors have used AIM shares to fund trusts, many have elected not to because of the volatility of the AIM market and therefore uncertainty as to the value of their assets after two years.

To overcome these concerns Octopus has established a lower risk BPR qualifying investments, called Octopus ITS, that can be used within Octopus Trust Builder. We've developed this lower risk investment with a focus on capital preservation because many of our investors have told us that protecting the value of their initial investment is just as important as saving tax.

Please remember that the value of an investment in this product may fall as well as rise and an investor may not get back the full amount invested. Tax rules and regulations are subject to change.