A common question I have had this week is, “What is the difference between a Solidus Plan and a Beneficiary Protection Plan (BPP) for Married Couples?”. The short answer is that the Solidus Plan is a defined framework which has a higher IHT focus for high-net-worth clients.
The popular BPP is for married couples where the key driver is asset protection. On first death Nil Rate Band (NRB) planning and/or life interest planning is popular and is achieved by the creation of a Will Trust for the benefit of the surviving spouse when the client deceases. The NRB or life interest assets are transferred by the executors to the Trustees following the Grant of Probate.
On the subsequent death of the surviving spouse the realisation of protection and inter-generational tax planning is achieved for their children/chosen beneficiaries. The residual estate (net estate after the payment of debts and IHT) is paid to one or more Beneficiary Protection Trusts. We refer to these Trusts as Settlements and they are Trusts established during lifetime. Generally, assets pass to these Trusts on death but because they are active Settlements, they can also be used for protective lifetime inter-generational transfers, which is an attractive feature.
The Solidus Plan has more of an IHT focus and is often used for HNW clients where there is generally a mix of property and investment assets. The main difference with the Solidus Plan is the focus on the actions of first death planning. It provides two individual Solidus Trusts (pilot Trusts, one for each spouse) The Solidus Plan Will always directs the NRB of the first to die to their Solidus Trust. At probate the primary residence is typically used to fund the NRB, and this offers two tax benefits of tax-free growth outside of the estate of the surviving spouse and potential tax savings on the death of the surviving spouse. The second element of the defined framework is the immediate post death gifting by the surviving spouse.
This is covered with the client from the onset of the planning and an expectation is set that, providing it is still relevant, the surviving spouse will gift up to £325,000 to their Solidus Trust shortly after the death of their spouse. This will offer a protected inter-generational transfer of assets from which the children can immediately benefit (treat it like a gift from their parent rather than a legacy in the Will). It will also mean if the surviving spouse survives 7 years up to £130,000 in IHT savings may be realised (“third Nil Rate Band”).
On the death of the surviving spouse the distribution can still be to one or more BPTs in the same way as detailed above.
So, there are overlaps between the BPP and the Solidus Plan, but they differ in their prescribed use of Nil Rate Band Planning and immediate post death inter-generational wealth transfers. It could be argued that setting up a Protective Gifting Trust could achieve a similar outcome but, in my experience, you must consider the emotional state of the survivor at that time and if they would want to set up another trust. It could be too overwhelming for them, and surviving spouses often worry if they will have enough to live on because of pension impacts etc. The Solidus Plan defaults to a “gifting Trust” so that the survivor has the Trust available and ready to make a lifetime gift which is something they would have previously discussed with their adviser and spouse. In my days of advising, this was a very popular arrangement for such clients with an estate size of over £1 million but especially those in excess of £2 million where the NRB and immediate post death gifting would help in claiming available Residence Nil Rate Band allowances.
The choice of which arrangement suits which clients will very much depend on the clients’ primary driver being protection or tax planning and affordability, but the Solidus Plan is an excellent premium solution for clients with appropriate estate assets (mix of main residence and other assets).