This is coming up quiet frequently of late so I'll quote the excerpt from a comparison document that one of the product providers has.
The advantages and disadvantages of the Assignment method are as follows:
Advantages
1. Through the Assignment of the policy to the child, the child is the full and beneficial owner of the assets within the plan.
2. All premiums/contributions made are deemed to be paid to the child, the child has beneficial entitlement and is in possession of those premiums.
3. By investing €3,000 a calendar year (or €6,000 for a couple) the child will not incur a gift tax liability nor will the relevant threshold for CAT purposes be impacted upon. Exit Tax will still apply.
4. The policy can still be encashed whilst the child is aminor by his/her parents/guardians however the money received must be for the full benefit of the child.
Disadvantages
1. Fund switching is not allowed ,therefore careful consideration as to the intial fund(s) chosen must be made by the donor.
2. As the child will be a minor, it is not possible to receive instruction from a minor to make amendments to the policy.
3. Further to this, as the child is the owner of the policy through the assignment, it is not possible to have his/her parents switch the funds.
The advantages and disadvantages of the General Trust Method are as follows:
Advantages
1. The trustee/initial policy owner retains full control of the policy and may switch funds throughout the lifetime of the policy.
2. There is no delay in distributing the proceeds of the policy in line with the policyholder’s wishes. The benefit from the policy is paid directly to the Trustees, on receipt of the necessary proofs.
3. Setting a policy up under Trust removes the need for it to be included in the Will.
4. Setting a policy up under Trust protects the proceeds of the policy from creditors, unless the policy was specifically effected to defraud creditors.
5. The trustees must pay the proceeds of the policy to the beneficiaries named on the trust form. A trustee can be a beneficiary but, as this may present a conflict of interest, it is not recommended.
Disadvantages
1. The *two criteria for Section 5 of the Capital Acquisitions Tax Consolidation Act 2003 (CATCA 2003) above are not met until such time that the savings plan is encashed and the money is paid to the beneficiary.
2. It is at this point that the beneficiary has an entitlement and is in possession to the accumulated fund of the savings plan, thereby triggering a Gift (CapitalAcquistions) Tax Liability.
3. On receipt of the value of the policy, the beneficiary may have a tax liability depending on the value received and the relevant threshold for CAT purposes.
*Two Criteria
1. There must be a beneficial entitlement
2. It must be in possession
It is always a case however that any client should seek professional taxation advice on these matters to ensure thatthe policy they require meets their specific needs.
Gerard
www.InvestAndSave.ie
The advantages and disadvantages of the Assignment method are as follows:
Advantages
1. Through the Assignment of the policy to the child, the child is the full and beneficial owner of the assets within the plan.
2. All premiums/contributions made are deemed to be paid to the child, the child has beneficial entitlement and is in possession of those premiums.
3. By investing €3,000 a calendar year (or €6,000 for a couple) the child will not incur a gift tax liability nor will the relevant threshold for CAT purposes be impacted upon. Exit Tax will still apply.
4. The policy can still be encashed whilst the child is aminor by his/her parents/guardians however the money received must be for the full benefit of the child.
Disadvantages
1. Fund switching is not allowed ,therefore careful consideration as to the intial fund(s) chosen must be made by the donor.
2. As the child will be a minor, it is not possible to receive instruction from a minor to make amendments to the policy.
3. Further to this, as the child is the owner of the policy through the assignment, it is not possible to have his/her parents switch the funds.
The advantages and disadvantages of the General Trust Method are as follows:
Advantages
1. The trustee/initial policy owner retains full control of the policy and may switch funds throughout the lifetime of the policy.
2. There is no delay in distributing the proceeds of the policy in line with the policyholder’s wishes. The benefit from the policy is paid directly to the Trustees, on receipt of the necessary proofs.
3. Setting a policy up under Trust removes the need for it to be included in the Will.
4. Setting a policy up under Trust protects the proceeds of the policy from creditors, unless the policy was specifically effected to defraud creditors.
5. The trustees must pay the proceeds of the policy to the beneficiaries named on the trust form. A trustee can be a beneficiary but, as this may present a conflict of interest, it is not recommended.
Disadvantages
1. The *two criteria for Section 5 of the Capital Acquisitions Tax Consolidation Act 2003 (CATCA 2003) above are not met until such time that the savings plan is encashed and the money is paid to the beneficiary.
2. It is at this point that the beneficiary has an entitlement and is in possession to the accumulated fund of the savings plan, thereby triggering a Gift (CapitalAcquistions) Tax Liability.
3. On receipt of the value of the policy, the beneficiary may have a tax liability depending on the value received and the relevant threshold for CAT purposes.
*Two Criteria
1. There must be a beneficial entitlement
2. It must be in possession
It is always a case however that any client should seek professional taxation advice on these matters to ensure thatthe policy they require meets their specific needs.
Gerard
www.InvestAndSave.ie
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