An absolute trust (also referred to as a bare trust) means the beneficiaries are fixed at outset and can never be changed. This type of trust may be useful for families who know exactly who they want to benefit and do not want the flexibility to change beneficiaries. Should a beneficiary die before the settlor, their share of the trust forms part of their estate for inheritance tax purposes.
Example: Tom has two children, Jake and Sue, and no other family. He invests £100,000 into an absolute trust for Jake and Sue equally. Sadly Jake dies before Tom. As the trust is an absolute trust, Jake’s share of the trust forms part of his estate and when the trust proceeds are distributed his share will pass through his will/intestacy.