Flexible Gift Trust

For Investment Bond

A Flexible Gift Trust can help your client to reduce the potential inheritance tax due on his or her estate by making an outright gift for the benefit of a wide class of beneficiaries. Because the Trust is written on a discretionary basis, your client can retain maximum control and flexibility in deciding who benefits and when.

Key benefits

  • Mitigate inheritance tax liability by making an outright lifetime gift.
  • Joint or single settlements can be made.
  • Available in conjunction with the Investment Bond.
  • Further top-up gifts can be made.
  • Existing life insurance investment bonds can be assigned into the Trust,
  • For clients who wish to make a gift in their lifetime and retain flexibility and control of the amount gifted.

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Key Details

  • 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.
  • Discretionary trust.
  • 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 chargeable lifetime transfer (CLT) for inheritance tax (IHT) purposes.
Inheritance tax (IHT)
  • If a gift is made in excess of the settlor's currently available nil rate band, lifetime inheritance tax (IHT) will be payable on the excess amount.
  • This will be at a lifetime rate of 20% if paid by the trustees, or 25% if paid by the settlor.
  • Property held within the Flexible Gift Trust is relevant property for IHT purposes.
  • IHT charges may apply at each 10 yearly anniversary and if property is transferred out of the trust to a beneficiary.

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 chargeable lifetime transfers but may be 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.
    • The exemption is potentially available regardless of the monetary value of the payment.
IHT reporting
  • Chargeable lifetime transfers into a trust may need to be reported to HM Revenue & Customs (HMRC) on form IHT100 even if no IHT is actually payable.
  • IHT100 reporting requirements and IHT charges may also apply every 10 years (periodic charges) or when trust capital is paid to beneficiaries (exit charges).

Key documents

Trust deed (PDF, 152KB)

Client brochure (PDF, 62KB)

Important notes for applications (PDF, 66KB)

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

View all product literature

Other information you need

  • The Flexible Gift Trust is suitable for clients:

    • whose estate is likely to be liable to inheritance tax (IHT) on death, even if maximum use is made of exemptions, reliefs and the nil rate band
    • who are able to make an outright, irretrievable gift and have no requirement for access to the gifted amount or the income it generates
    • who want the flexibility to decide who should benefit, to what extent and when according to circumstances
    • who want control over when the funds are distributed and perhaps the purpose for which they are used
    • who would like to ensure that the gifted property is kept within the family and afforded some protection from claims by third parties
    • who wish to avoid any delay in distributing the proceeds of their investment which may otherwise arise where probate (or confirmation) is required before payment could be made
    • who are prepared to accept the reporting obligations and the possibility of tax charges which apply under the relevant property regime for IHT purposes

    Not for your client?

    Take a look at our other trust options

    • The Flexible Gift Trust enables your client to make a gift to a wide ranging class of beneficiaries yet maintain flexibility and control over who gets what and when.
    • In addition, provided the amount gifted is below your client's available nil rate band, there will be no lifetime IHT payable on creation of the trust.
  • The Flexible Gift Trust is designed for use with the Investment Bond

    View fund factsheets, fund prices and fund performance

  • The Flexible Gift Trust is not subject to any charges.

    Please see the Investment 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 Flexible Gift Trust, which is on a discretionary basis.

    Should they wish to establish the trust on an absolute basis, please look at our Fixed Gift Trust (creating fixed trust interests)

    Please also ensure your client has read the important notes for applications (PDF, 66KB)

    The application stages (new investment):

    Step 1

    • Complete the Flexible Gift Trust (PDF, 152KB) and the Investment Bond (PDF, 63KB) application forms.
    • You will then need to print the forms and ensure they are signed by all the relevant parties.
    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 Flexible 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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