Discretionary Trust Taxation - Policy Claim in First 10 Years
In the event of a claim on the policy in the first ten years and assuming the trustees pay the policy sum assured out to the beneficiaries, there is a theoretical exit charge.
However, an exit charge is only payable if an entry charge has previously been paid.
Provided there is no entry charge payable when the policy is set-up and placed into trust (which would be the case if the premiums for the policy were within one of the available exemptions) there would be no entry tax charged when the trust is set up.
As the premiums for the policy were within one of the available exemptions, there has been no previous entry charge. This means that there will be no exit charge.
This also means that there will be no exit charge regardless of the sum assured paid out, in theory, it could be millions of pounds and there will still be no tax whatsoever to pay.
Provided the policy has no value or deemed value on any 10th anniversary, then in the event of a policy claim in the following ten years, then, as in the first ten years, there will be no exit charge.
