When a surrender profit occurs, does the profit go to the inherited estate or go to the asset shares of the other policies?
It depends what the company practice is, it could go to either. The surrendering profit is a possible component of the asset share calculation. Thanks Em
Another question on the same topic, how is it fair to use the inherited state towards the payment of taxes incurred by fund on distribution to shareholders? What kind of taxes are incurred?
Tutors feel free to correct me but my understanding is that it is generally not seen as an ideal situation. In the UK at least you're not allowed to pay tax on SHTs out of the fund unless it was established practice - i.e. in the PPFM etc - at the time the rule came in. (COBS 20.2.20). I'm not sure why they didn't just disallow it altogether but I have seen arguments against this. My view is that just because it is established practice it doesn't mean it is appropriate practice.
Yes - that sounds correct. This is about paying tax on the money that is distributed to shareholders out of the with-profits fund (the shareholder transfers). It basically boiled down to whether the shareholders being eligible to receive '1/9 cost of bonus' (for the 90:10 funds where this has typically been an issue) was intended to mean before or after the deduction of (shareholder) tax.
