Lifetime Trusts and IHT
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Introduction
Lifetime Trusts play a key role in managing Inheritance Tax – by allowing clients to transfer assets out of their estate during their lifetime. By reducing the value of the estate, less tax may payable upon death. This strategy can help preserve wealth for future generations, while providing control over how and when beneficiaries receive assets.
The essentials
Lifetime Trusts can be created in many different ways, but we focus here on those created using Onshore Investment Bonds as these may come under your client recommendations.
Key types of Lifetime Trust include:
- Bare Trusts – where assets belong to a named beneficiary but are looked after by Trustees – often used for beneficiaries aged under 18
- Interest in Possession Trusts – often where income is payable to a life tenant and on death the Trust passes to other people
- Discretionary Trusts – the most flexible form of Trust, where the Settlor identifies beneficiaries by name or relationship
- Personal Injury Trusts – where funds in the Trust were received following an injury claim, most commonly following a car accident or medical negligence incident
More to think about
- Registration with the Trust Registration Service
- IHT100 forms for Lifetime Transfers over a certain level
- Charges within a Discretionary Trust
More information
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