If your client has decided to invest in an investment bond, there are a number of trust arrangements they can use to help reduce their inheritance tax (IHT) liability.
This guide is simply designed to give some information about IHT planning solutions. It's essential that your client takes appropriate legal and tax advice before taking any action.
Bare Gift Trust
A Bare Gift Trust is established via a gift to the trustees and the client will renounce all access to the money. The gift is considered a potentially exempt transfer (PET). The client can't change the named beneficiaries or their percentage share and the trustees must pay out the trust fund if adult beneficiaries ask for it.
Click here for more information on our Bare Gift Trust and the supporting documentation.
Bare Loan Trust
A Bare Loan Trust is established via a loan to the trustees. The client can receive regular repayments, eg 5% a year tax deferred, or ad hoc repayments. The outstanding loan forms part of the client's IHT estate on death. However, the growth is immediately outside their IHT estate. The named beneficiaries can't be changed, nor can their percentage share.
Click here for more information on our Bare Loan Trust and the supporting documentation.
Bare Discounted Gift Trust
Bare Discounted Gift Trust - with this trust, the underwritten discount and growth on the bond are immediately outside the client's IHT estate. They're entitled to a fixed stream of payments from the trust during their lifetime as long as there's enough money in the trust fund. The gift after deduction of the underwritten discount is a PET. The client is able to select at the outset who benefits from the trust after their death.
Click here for more information on our Bare Discounted Gift Trust and the supporting documentation.
Discretionary Gift Trust
A Discretionary Gift Trust is established via a gift to the trustees and the client renounces all access to the money. The gift is a chargeable lifetime transfer (CLT). The trustees can control who benefits from the gift and when.
Click here for more information on our Discretionary Gift Trust and the supporting documentation.
Discretionary Loan Trust
A Discretionary Loan Trust is established via a loan to the trustees. The client can receive regular loan repayments, eg 5% a year tax deferred or ad hoc repayments. The outstanding loan forms part of the client's IHT estate on their death. However, the growth is immediately outside the client's IHT estate. The trustees can control who benefits from the trust fund and when.
Click here for more information on our Discretionary Loan Trust and the supporting documentation.
Discretionary Discounted Gift Trust
Discretionary Discounted Gift Trust - with this trust, the underwritten discount and the growth on the bond are immediately outside the client's IHT estate. The client is entitled to a fixed stream of income payments from the trust during their lifetime as long as there's enough money in the trust fund. The gift after deduction of the underwritten discount is a chargeable lifetime transfer (CLT). The trustees can also control who benefit from the trust after the client's death.