Features and benefits

Eligibility

  • The settlor(s) must be 18 years or over and of full mental capacity
  • We will not normally accept a trust created under a power of attorney

Features

  • Ability to create an absolute trust (ie fixed trust interests)
  • Joint or single settlements available
  • The initial trust capital will usually be provided by investment into the Investment Bond
  • On setting up the Trust, the settlor will be treated as having made a potentially exempt transfer (PET) for inheritance tax (IHT) purposes

Inheritance tax (IHT)

  • In establishing the Gift Trust, the client will be treated as having made a PET (to the extent that it is not exempt). The value of the gift will usually be the amount invested
  • No lifetime IHT is payable when a PET is made
  • If the settlor survives 7 years from making the gift, it will become exempt from IHT
  • If the settlor dies within 7 years of making the gift, it will become chargeable to IHT and use all or part of the settlor’s nil rate band for the purposes of calculating tax on their free estate

Additional gifts

  • The settlor can assign other bonds into the Trust
  • The settlor can make further cash gifts which can either be used by the trustees to invest in another asset or top-up an existing investment bond


Further gifts to the Trust will usually be PETs, but may be immediately exempt from IHT if covered by any of the following exemptions

  • Annual exemption
    - Gifts of up to £3,000 can be made each tax year without any liability to IHT
  • Normal expenditure out of income exemption
    - Gifts made regularly out of surplus income can qualify for exemption from IHT
    - If allowed, the exemption will be available regardless of the monetary value of the payments
  • Gifts in consideration of marriage
    - Where the Gift Trust is established for one beneficiary only, a single further gift by the same settlor would be exempt if made in consideration of and on the occasion of marriage of the beneficiary
    - If the gift is to be entirely exempt it must not exceed £5,000 if the settlor is the parent of the beneficiary; £2,500 if the settlor is the grandparent of the beneficiary; £1,000 if the settlor is not the grandparent or parent of the beneficiary

IHT reporting

  • There is no requirement for IHT reporting as the Gift 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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