Features and benefits

Eligibility

  • The settlor(s) must be 18 years or over and of full mental capacity
  • We will not normally accept trusts created under a power of attorney
  • Joint or single settlements available
  • Only for use in conjunction with the Scottish Widows OEIC

Features

  • Discretionary trust for joint or single settlors
  • The initial trust capital will usually be provided by investment into a Scottish Widows OEIC
  • Can accommodate existing investments
  • Creates an irrevocable, outright gift in favour of a wide class of beneficiaries excluding both the settlor and the settlor's spouse.

Inheritance tax (IHT)

  • On setting up the trust with a lump sum investment the settlor will be treated as having made a chargeable lifetime transfer for inheritance tax purposes
  • Regular investments will usually be classified as exempt gifts, for example, if made out of surplus income but will otherwise be chargeable
  • No inheritance tax payable on creation of the trust if value of gift below settlor's available nil rate band
  • Inheritance tax charges may apply periodically (every 10 years) and where capital is distributed to a beneficiary

IHT reporting

  • IHT100 reporting requirements may arise on creation of the trust, on each 10th anniversary of the trust and when trust capital is paid to beneficiaries

Other tax

  • Accumulated income will be taxed at trust rates of 38.1% (for dividend income) and 45% (interest)
  • Dividend income that is distributed to beneficiaries may be subject to high effective rates of tax
  • Capital gains tax may be payable by the settlor where an existing OEIC is put into the trust
  • Capital gains made by the trustees may be subject to the higher rate

Risks

  • Trustees may not have additional financial resources with which to pay the additional tax on the gross income produced by the OEIC
  • High effective rates of tax may result where dividend income is distributed to a beneficiary, unless the trustees have a built up tax pool

Copyright ©2018 Scottish Widows | Copyright, companies, legal and privacy information |  Accessibility | Site map

Important Information about Scottish Widows | Read about how we use cookies

Information within this site is intended for UK authorised and regulated financial advisers only. It is not intended for onward transmission to retail customers and should not be relied upon by any other person. If you are not an adviser please return to our consumer site.

Scottish Widows is not responsible for the content of third party websites. Separate terms apply to the use of third party websites and Scottish Widows does not warrant the accuracy, reliability, availability or otherwise of these sites.

By using this site you agree to our terms & conditions of use. Please read our copyright, companies, legal and privacy information. We may record and monitor calls to help us improve our service.

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.

Browser Warning: your browser may not be fully supported on this site. Visit our browser help page for a list of supported browsers.
close