Features and benefits
- Inheritance Tax planning: growth on gifted money is immediately outside of the client's estate. The gift is fully outside of the estate after 7 years.
- Choice of trust: the trust can be written on either an Absolute or Discretionary basis, to suit your client’s requirements.
- Investment options: your client has a choice of onshore and international bonds.
- Probate: trustees can access money immediately upon your client's death.
- Suitability: the Gift Trust is suitable if your client does not require any access to the capital or any growth from the trust. Payments can be made to trust beneficiaries at any time, but your client cannot benefit in any way.
Please remember that the value of your client’s investment is not guaranteed and can go down as well as up. Their beneficiaries may get less than your client puts in.
About the Gift Trust
The Gift Trust from Prudential and Prudential International provides an Inheritance Tax planning solution for clients who want to make an outright gift in a tax-efficient way.
Any potential growth on the investment will be outside your client’s estate from the start and, depending on circumstances, there may be no Inheritance Tax due on the trust fund.
It is essential to note that, once the trust has been set up, the client cannot benefit from it at all. The Gift Trust is therefore only suitable where your client does not want or need any future access to the capital or any growth it may produce.
How does the Gift Trust work?
The bond is put into trust during your client's lifetime.
Payments can be made to the beneficiaries at any time, providing that your client does not benefit.
The trust will continue to the end of the trust period or until all assets have been distributed.
After your client's death, the trust can continue or be wound up with the proceeds paid out.
The proceeds from the trust may be wholly or largely free of Inheritance Tax.
The trust can be set up by a single or joint donor.
It can be written as an Absolute or Discretionary trust, depending which better suits your client’s needs.
Choice of trusts
The Gift Trust can be written as either an Absolute or Discretionary Trust, depending on your client’s needs.
Your client must select the beneficiaries and their share of the trust fund when setting up the trust. May be suitable if your client is sure of how they would like trust assets to be distributed.
There is currently no requirement to report details to HM Revenue & Customs (HMRC).
Trustees can alter the beneficiaries of the trust or their share of it. May be suitable if your client thinks this may be necessary in future.
Details of the trust must be provided to HMRC at specified times.
For information on the types of trust available, see the adviser guide to gifting an investment into trust (PDF).
Choice of products
For new bonds, your client can choose from the following current products.
Additionally, the Gift trust can be used with an existing Prudential or Prudential International Bond.
Ongoing Adviser Charges
Prudential will facilitate Ongoing Adviser Charges for advice given to the trustees, funded by withdrawals from the bond which will impact on the 5% tax deferred allowance.
As the trustees are not party to the bond application form, the ongoing adviser charge instruction section on the application form must be left blank. Instead, the trustees will need to complete the appropriate adviser charge instruction form.
Trustees should not pay for ongoing advice given to the settlor as that could be regarded as a breach of trust with adverse tax consequences.
The impact of taxation (and any tax reliefs) depends on individual circumstances.
The information is based on our understanding, of current taxation, legislation and HM Revenue & Customs practice, all of which are liable to change without notice.