Is a Lifestyle Trust the right IHT solution for you?

It is getting harder and harder to shelter your assets from the Government when you die, as the Inheritance Tax (IHT) thresholds have not changed since 2009.

One additional solution, not previously discussed is a Lifestyle Trust.

In the world of IHT, if you give away an asset and survive 7 years, it is exempt from IHT. However, you cannot access the money.

Many people would love to give some of their money to their children but don't want to leave themselves short. If you gift money to your children on the basis that you can get it back if needed, that is NOT a gift and will still be classed as your money which will form part of your estate for IHT.

So, to start the 7-year clock ticking, you have to say "BYE" to your money and mean it. If you want access that is fine, it is your money, but there will be no IHT saving.

So you cannot have your cake and eat it. Or can you?

A lifestyle Trust works as follows: You invest a capital lump sum (via an Investment Bond) into a lifestyle trust. You agree up-front and in writing how much you want to take out on a regular basis and at what frequency, for example £5000 per annum. As the date of payment approaches, if you do not want the payment you can postpone it. Anything you take out is back in your estate but on the assumption you are taking out the money to spend, this isn't a problem. Once you have survived 7 years, all the original capital not taken out is free of IHT. Any growth in the investment is also outside your estate and from day one.

There will be many estates where our clients think they will be below the threshold. However, from April 2027, personal pensions will be included in the calculation and we think this is going to push lots of people into the unwelcome world of IHT.

So, by setting up a lifestyle trust, you can have your cake and eat it! Please contact us if you want more details.

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