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

  • Discretionary trust
  • 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 chargeable lifetime transfer for inheritance tax purposes

Inheritance tax (IHT)

  • If a gift is made in excess of the settlor's currently available nil rate band, lifetime inheritance tax (IHT) will be payable on the excess amount
  • This will be at a lifetime rate of 20% if paid by the trustees, or 25% if paid by the settlor
  • Property held within the Flexible Gift Trust is relevant property for IHT purposes
  • IHT charges may apply at each 10 yearly anniversary and if property is transferred out of the trust to a beneficiary

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 chargeable lifetime transfers but may be 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
    - The exemption is potentially available regardless of the monetary value of the payment

IHT reporting

  • Chargeable lifetime transfers into a trust may need to be reported to HM Revenue & Customs (HMRC) on form IHT100 even if no IHT is actually payable
  • IHT100 reporting requirements and IHT charges may also apply every 10 years (periodic charges) or when trust capital is paid to beneficiaries (exit charges)

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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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