Best start in life 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 - if they survive seven years after making the gift (unless an exemption applies).

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 ability to encash policies within the bond using the beneficiary’s rate of tax makes this solution ideal for providing for beneficiaries early in life. For example, funding school and university fees.

The settlor cannot benefit from the trust; therefore it would be unsuitable for a client who requires income or access to capital.

‘Parental settlement rules’ dictate that the settlor will be taxable for any income arising within a bare trust they created for their minor, unmarried child. For this reason, this solution will not have the same income tax benefits where the settlor is the parent of a minor beneficiary. However, there may be income tax planning benefits after the children turn 18 and your client may still make the most of the other benefits a discretionary trust brings.