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Our Flexible Reversionary Plan (FRP) is a modern estate and inheritance planning solution that’s designed to give your clients more control over how they gift their assets.
It’s a discretionary trust that allows your clients to set up an optional income on their bond anniversary to support their future needs. Unlike traditional estate planning tools, our FRP comes with greater flexibility built in. For example, they can decide what to do with each payment. They can draw funds if they need to, keep their money invested, defer the payment to a later date or tell the trustees to assign or pay it to their beneficiaries.
The FRP is only available for use alongside our International Bond.
Benefits of the FRP
Inheritance tax savings
Whatever’s gifted into the FRP will fall outside your client’s estate after seven years (although the exception to this is any unspent payments that have reverted back to them). Any growth on investments held for beneficiaries will immediately fall outside their estate.
Advance beneficiary payments
Payments can be made to beneficiaries in your client’s lifetime - offering an extra level of flexibility traditional estate planning solutions can’t provide.
Flexible access
Your client sets an agreed level of income based on their expected needs. They agree with trustees whether this is ultimately used for their benefit, or passed on to their beneficiaries.
Technical and service support
You and your clients can rely on our team of trusted experts for seamless plan set up and responsive support for any ongoing queries.
How our Flexible Reversionary Plan works
Setting things up
- Your client and their appointed trustees complete an FRP trust deed.
- A professional trustee must be appointed unless the adviser agrees to remind trustees to take appropriate action on upcoming reversions.
- The trustees then apply for an International Bond with us, which can be written on a Capital Redemption or Life Assured basis.
- If your client already has an International Bond with us, it will be assigned into the FRP by the FRP trust deed.
Initial gift and tax treatment
- Your client invests a minimum of £20,000 into the FRP which is invested in the International Bond.
- There will be no inheritance tax payable on the gift if your client lives for 7 years after it has been made (although any payments which have reverted back to your client will form part of their estate for IHT purposes, if unspent).
- Any growth in the FRP will immediately be outside your client’s estate for inheritance tax purposes.
Securing an optional, flexible income
- Your client decides the level of income they’d like the option to access for the duration of the bond.
- To manage this future entitlement, the FRP is split into multiple segments (up to 9,999).
- The exact number of segments created is entirely up to your client, though the value held in each must be at least £200.
- The full value of a pre-agreed number of segments will then revert back to your client (‘reversion’) on pre-selected anniversaries of the Bond (‘reversion dates’).
Keeping income options open
On each reversion date, the trustees can take one of three actions:
- Allow the reversion
This is the default option. The segments revert to your client and will be held on trust for their benefit. Once this happens, these segments can no longer be paid or assigned to beneficiaries.
- Defer the reversion
Before the reversion date, the trustees can choose to defer it. This means your client’s entitlement to those segments is postponed to a future reversion date.
- Defeat the reversion
Before the reversion date, the trustees tell Standard Life to pay out, appoint capital or assign segments to one or more of your client’s nominated beneficiaries. In this case, your client will not receive the proceeds from those segments.
Beneficiary flexibility
- Payments can be made to the nominated beneficiaries during your client’s lifetime.
- Beneficiaies can also benefit after your client has died without including this information in their will or the need for probate.
Trustee responsibilities
- A professional trustee must be appointed unless the adviser agrees to remind trustees to take appropriate action on upcoming reversions.
- It is up to the trustees to let your client know that a reversion date is approaching and to makes sure they take the appropriate action in time.
- The trustees must keep up to date records and ensure the reversions are paid correctly.
The FRP may be suitable for clients who
- Have at least £20,000 to invest
- Want to reduce their inheritance tax liability
- Are unsure about their future income needs and would like the option of being able to access the assets in the future
- Would like the ability to make income payments to their beneficiaries during their lifetime
- Are comfortable accepting a level of investment risk in return for potential capital growth
The FRP may not be suitable for clients who
- Have less than £20,000 to invest
- Would like full access to their capital at all times
- Seek a guaranteed return or can’t accept any investment risk
Read our key documents
Adviser Q&As
We have developed detailed Q&As to help understand more on how the FRP works, IHT considerations and what it means for your clients.
FRP case studies
We have developed a guide with case studies to bring to life how the FRP could benefit your clients.
FRP Trust Deed
When you are ready to set up a FRP for your client please complete the FRP Trust Deed.
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