Lifestyle 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. As with a standard discretionary gift trust, the gift to the trust is treated as a Chargeable Lifetime Transfer (CLT) which will leave the estate if the settlor survives 7 years from the date of the gift. Any capital taken back from the trust will return to the settlor’s estate.

The trust provides access to its capital on a schedule determined by the settlor at the time the trust is established. At any time ahead of their entitlement vesting, the settlor may defer their entitlement without creating a further gift for IHT. This means the trust may be suitable for clients who wish to make IHT planning provisions but allow for future capital requirements or ‘Lifestyle’ events.

Entitlements cannot be brought forward. Therefore, this trust is not suitable for clients who may require immediate access to all the trust’s capital.

The Lifestyle trust is a discretionary trust which provides for wide classes of beneficiaries. For example, both current and future children / grandchildren are included automatically. If the classes of beneficiaries do not include individuals, which the client would want to benefit, they can be added to the trust deed.