Gift Trusts

What are they?

• These are trusts that are utilised for gifting assets away
• These are therefore used for reducing a clients estate for inheritance tax purposes
• Any gifts into these trusts are chargeable lifetime transfers

Variations

• The Standard Version
• The settlor only cannot benefit from the trust
• Commonly used where the asset being gifted away is not an asset that would trigger a capital gains tax charge on transfer
• Most commonly used for the settlement of cash for a property to then be purchased, funds to be invested or loaned

• The Holdover Version
• The Settlor, their spouse and any minor children cannot benefit from the trust
• Commonly used for the gift of assets that would create a capital gains tax liability
• The term ‘holdover’ refers to the ability to essentially defer the capital gain until a later date

• The Taxation
• These trusts are termed relevant property trusts for tax purposes
• Therefore subject to periodic & exit charges albeit these can be mitigated
• Any transfers into these trusts will be chargeable lifetime transfer, meaning that no more than £325,000 can be settled per settlor, within a 7 year period, albeit this issue too can be mitigated