The Lifestyle Trust offers clients the ability to make a gift of capital (reducing their estate for IHT purposes) to trustees whilst retaining flexible access to their capital in the future – or to forgo that access if they choose to do so. The settlor creates policy funds for their future use. These are rights to the monies held in individual policies within the investment at set ‘vesting’ dates. When the vesting date for a policy fund is approaching the settlor can decide whether they want the money or whether to gift it away. The trustees can also appoint money to the beneficiaries prior to the vesting date which results in the settlor’s right to some or all of their money being lost.
Example: John is 80 and invests £100,000 into an Old Mutual Wealth Collective Investment Bond subject to a lifestyle trust. He has no requirement for the capital but likes cruising and wants to plan a cruise for each year while he is in good health. He therefore sets up policy funds of 50 policies every year so that he knows he will always have the money available to pay for each holiday.