Features and benefits

Eligibility

  • The settlor(s) must be 18 years or over and of full mental capacity
  • We will not accept a trust created under a power of attorney
  • Minimum investment of £30,000 into the Investment Bond

Features

  • Ability to create a fixed (absolute) trust (ie creating fixed trust interests)
  • Trustees hold the trust fund as nominees for your client's chosen beneficiary or beneficiaries, who are absolutely entitled to their specified share(s) of the trust fund, subject to the settlor's overriding right to a fixed income for life
  • Joint or single settlements available
  • The initial trust capital must be provided by an investment into the Investment Bond
  • On setting up the trust the settlor will be treated as having made a potentially exempt transfer (PET) for IHT purposes. This is discounted by the value of the settlor's retained right to income for life (subject to underwriting)

IHT

  • The value of the potentially exempt transfer is the value of the investment less the value of the settlor's retained right to income. This is actuarially calculated at outset, provided full in advance underwriting or concurrent underwriting is requested. If a discount is available, this normally provides an immediate saving in IHT if the client dies within 7 years of establishing the trust

Income

  • The level income requirement must be established at outset and cannot be amended later
  • The settlor may defer, waive or postpone the right to receive income. However, this is likely to reduce the IHT effectiveness of the planning.
  • The income is funded by capital withdrawals from the investment bond held as a trust asset. The withdrawals are subject to income tax under the chargeable event gains regime, although any liability to income tax can normally be deferred until a chargeable event arises and a gain occurs

IHT reporting

  • There is no requirement for IHT reporting as the Discounted Gift and Income Trust (creating fixed trust interests) is not a relevant property trust

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Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655.

Scottish Widows Unit Trust Managers Limited. Registered in England and Wales No. 1629925. Registered Office in the United Kingdom at Charlton Place, Andover, Hampshire SP10 1RE. Tel: 0345 300 2244. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 122129.

HBOS Investment Fund Managers Limited, registered in England number 941082. Registered office in the United Kingdom at Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 119223.

Scottish Widows Bank is a trading name of Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales, no. 2065. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 119278.

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