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Discretionary trust

Discretionary trust (settlor excluded) – English and Scots law available (Best Start in Life Trust and Excess Income Trust)

This type of trust can be suitable for inheritance tax (IHT) planning as it moves the client’s assets outside of their estate for IHT purposes. (Time restrictions might apply).

Often used by families for succession planning, the wide class of beneficiaries means spouses along with existing and future children and grandchildren are included automatically.

If the classes of beneficiaries do not include individuals who the client would want to benefit, they can be added to the trust deed.

The Best Start in Life Trust may be used when minor children are to benefit. For example, when grandparents want to set up a trust for their grandchildren.

The Excess Income Trust may be used by UK domiciled individuals who want to make regular periodic gifts into trust exempt from inheritance tax out of their surplus annual income.

 

Discretionary trust (settlor included) – English and Scots law available (probate trust)

This trust is not IHT efficient – this is because the value in the trust is still considered to be in the settlor’s estate for IHT purposes. These are more commonly used for investments where individuals don’t have an inheritance tax liability, want to be able to access their capital as they need to, and want to ensure the proceeds are paid out quickly on their death.

Spousal bypass trust – English law

A spousal bypass trust is the same as a discretionary trust (settlor excluded). The benefits of an individual’s pension are paid into the trust rather than directly to their spouse. This means the benefits are held for the spouse and other classes of beneficiaries (such as children/grandchildren) but the value of the pension death benefit does not count in their estate for inheritance tax purposes unless they are appointed to them.

Trust forms

Go straight through to the trust froms on our literature library.

Trust decision tree

This takes you through a journey based on clients' needs to find the correct trust.

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