Fixed Gift Trust

For Investment Bond

A Fixed Gift Trust can help your client reduce the potential inheritance tax (IHT) due on his or her estate by making an outright gift for the benefit of named beneficiaries. By establishing a Gift Trust on this basis, your client can take advantage of the potentially exempt transfer regime for IHT purposes.

Key benefits

  • Mitigate inheritance tax liability by making an outright lifetime gift.
  • Joint or single settlements can be made.
  • Available with the Investment Bond.
  • Further top-up gifts can be made.
  • Existing life insurance investment bonds can be assigned into the Gift Trust.
  • Not suitable for clients who require flexibility and control.
  • Ability to create an absolute (bare) trust.

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Key details

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
  • Ability to create an absolute trust (ie fixed trust interests).
  • 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 potentially exempt transfer (PET) for inheritance tax (IHT) purposes.
Inheritance tax (IHT)
  • In establishing the Gift Trust, the client will be treated as having made a PET (to the extent that it is not exempt). The value of the gift will usually be the amount invested.
  • No lifetime IHT is payable when a PET is made.
  • If the settlor survives 7 years from making the gift, it will become exempt from IHT.
  • If the settlor dies within 7 years of making the gift, it will become chargeable to IHT and use all or part of the settlor’s nil rate band for the purposes of calculating tax on their free estate.
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 PETs, but may be immediately 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.
    • If allowed, the exemption will be available regardless of the monetary value of the payments.
  • Gifts in consideration of marriage
    • Where the Gift Trust is established for one beneficiary only, a single further gift by the same settlor would be exempt if made in consideration of and on the occasion of marriage of the beneficiary.
    • If the gift is to be entirely exempt it must not exceed £5,000 if the settlor is the parent of the beneficiary; £2,500 if the settlor is the grandparent of the beneficiary; £1,000 if the settlor is not the grandparent or parent of the beneficiary.

 

IHT reporting
  • There is no requirement for IHT reporting as the Gift Trust (creating fixed trust interests) is not a relevant property trust.

Key documents

Trust deed (PDF) 

Client brochure (PDF)

Important notes on applications (PDF)

See all our trust Fixed Gift documents in one place, including forms, guides and brochures.

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Other information you need

  • The Gift Trust may be suitable for clients:
    • who want to take advantage of the favourable potentially exempt transfer (PET) regime
    • who want to make an outright, irretrievable gift.
    • who are willing to make a decision now on who should benefit from the amount invested.
    • who are content that adult beneficiaries could choose to direct the trustees how the funds should be invested and may call for payment of the trust fund at any time
    • who wish to avoid delays in distributing the proceeds of their investment.

    Not for your client?

    Take a look at our other trust options

    • The transfer into the Gift Trust is treated as a potentially exempt transfer for inheritance tax (IHT) purposes and the value of the gift will fall outside your client's estate provided they survive for the next 7 years.
    • In addition there is no lifetime IHT payable on the value of the gift, regardless of the amount transferred.
  • The Gift Trust is designed for use with the Investment Bond

    View fund factsheets, fund prices and fund performance

    • The Gift Trust is not subject to any charges.
    • Please see the Investment Bond for charges in relation to the bond.

    Important notice

    Please note that charges, terms and limits may change. We may change the selection of funds that we make available. There may be restrictions on the amount that can be invested in certain funds. Please contact us for details of any restrictions that apply. Tax treatment depends on the individual circumstances of your client and may be subject to change in the future.

  • Before you apply

    Before proceeding to the application stage, you should ensure that your client wishes to set up a Fixed Gift Trust (creating fixed trust interests), which is on an absolute basis.

    Should they wish to establish the trust on a discretionary basis, please look at our Flexible Gift Trust

    Please also ensure your client has read the important notes for applications (PDF)

    The application stages (new investment)

    Step 1
    The following items should accompany the application
    • Cheque for investment amount.
    • Confirmation of verification of identity of the settlor(s) and all additional trustees.
    • Copy of illustration.
    Step 2
    • Policy documents will be issued to the trustees.

    The Gift Trust can also be used for existing polices. Should you require any further information, please speak to your usual sales contact.

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