Session 006: Bits and bobs about bonds

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Write down your answers to each of the following questions and check your answers when you click to claim your CPD certificate on the link below

1.      Six years ago, Bob set up a discretionary gift trust. He died two years later. The trustees trigger a bond gain making the trust taxable for the first time. In respect of the Trust Registration Service (TRS) which of the following statements is false?

A)      The TRS needs to be updated within 90 days of the trust becoming taxable.

B)      Failure to update the TRS could lead to a penalty of £5,000.

C)     No action required if the trust fund is being distributed as the trust will end.

D)     Additional information will need to be added to the TRS.

2.      It’s the top-sliced bond gain, not full gain, that is used to determine if an individual needs to self-assess.

A)    True

B)    False

3.      Which of the following scenarios is an appropriate use of a Gift Assignment?

A)    Liz owns a bond. She wants to cash in the bond to buy herself a new car. If she surrenders the gain will create a tax liability. If she assigns the bond to her husband Neil, he could cash in with no further tax and give her the money back to buy a car.

B)    Tony and Carmela jointly own a bond. They want to cash it in and use the proceeds to buy a new kitchen. Joe would incur a tax liability on his half of the gain but if the bond is assigned to Carmela she’d have no tax on the full gain.

C)    Atif is a higher rate taxpayer. He owns a bond but no longer needs the money. He wants to gift the money to his daughter. If he surrenders he’d incur a tax liability. If he assigns to his daughter who is basic rate she wouldn’t incur a tax liability.

D)    Gio wants to gift the money in his bond to his son who lives in America. The son’s tax adviser has said it would be more tax efficient for his son to receive the gift as cash. If Gio surrenders he’d incur a tax liability. If he assigns to his wife first she would have a tax liability on the gain. She can then make the gift of cash to the son.

4.    Which of the following scenarios is likely to be considered deliberate deprivation of assets in respect of bonds and means tested benefits.

A)    Setting up a bond when the motive is to avoid the money being considered in the financial assessment.

B)    Parent gifting a bond into a discretionary gift trust where one of the potential beneficiaries is on means tested benefits.  

C)    Trustees of a discretionary Will trust invest in a bond and the main beneficiary is on means tested benefits. 

D)    The adviser recommends a bond to client in their 50s and in good health who did not mention any concerns about paying for residential care in later life.

1.      Six years ago, Bob set up a discretionary gift trust. He died two years later. The trustees trigger a bond gain making the trust taxable for the first time. In respect of the Trust Registration Service (TRS) which of the following statements is false?

A)      The TRS needs to be updated within 90 days of the trust becoming taxable.

B)      Failure to update the TRS could lead to a penalty of £5,000.

C)     No action required if the trust fund is being distributed as the trust will end.

D)     Additional information will need to be added to the TRS.

2.      It’s the top-sliced bond gain, not full gain, that is used to determine if an individual needs to self-assess.

A)    True

B)    False

3.      Which of the following scenarios is an appropriate use of a Gift Assignment?

A)    Liz owns a bond. She wants to cash in the bond to buy herself a new car. If she surrenders the gain will create a tax liability. If she assigns the bond to her husband Neil, he could cash in with no further tax and give her the money back to buy a car.

B)    Tony and Carmela jointly own a bond. They want to cash it in and use the proceeds to buy a new kitchen. Joe would incur a tax liability on his half of the gain but if the bond is assigned to Carmela she’d have no tax on the full gain.

C)    Atif is a higher rate taxpayer. He owns a bond but no longer needs the money. He wants to gift the money to his daughter. If he surrenders he’d incur a tax liability. If he assigns to his daughter who is basic rate she wouldn’t incur a tax liability.

D)    Gio wants to gift the money in his bond to his son who lives in America. The son’s tax adviser has said it would be more tax efficient for his son to receive the gift as cash. If Gio surrenders he’d incur a tax liability. If he assigns to his wife first she would have a tax liability on the gain. She can then make the gift of cash to the son.

4.    Which of the following scenarios is likely to be considered deliberate deprivation of assets in respect of bonds and means tested benefits.

A)    Setting up a bond when the motive is to avoid the money being considered in the financial assessment.

B)    Parent gifting a bond into a discretionary gift trust where one of the potential beneficiaries is on means tested benefits.  

C)    Trustees of a discretionary Will trust invest in a bond and the main beneficiary is on means tested benefits. 

D)    The adviser recommends a bond to client in their 50s and in good health who did not mention any concerns about paying for residential care in later life.

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