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Overview
A simple IHT solution where the client does not require access to the capital, knows who they want to leave their wealth to, and requires no future flexibility.
Quick facts
- Also known as a bare trust.
- Two absolute trusts are available on Quilter's platform:
1. The Absolute Trust - for use with the Collective Investment Bond
- The Absolute trust is available in English and Scottish law.
- This is a trust where your client, the settlor, makes a gift to trust and irrevocably nominates their beneficiaries. Once the trust is in place, neither the beneficiary nor their share of the trust fund can be changed.
- The settlor chooses their trustees. They can also appoint themselves as a trustee.
2. The Designated Account (irrevocable version) – for use with the Collective Investment Account
- Once the designation is in place, the beneficiaries cannot be changed.
- The settlor is automatically appointed as a trustee. Additional trustees can be appointed post issue.
Suitability
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).
As the beneficiaries of the trust are fixed at outset, the trust is used where the settlor knows exactly who they wish to benefit from it. It is not suitable where the settlor wishes to give the trustees discretion over the distribution of the trust’s assets.
The beneficiaries have an absolute entitlement to the trust fund. This means the value of the trust property is within their estate for IHT purposes.
Where all named beneficiaries reach age of majority, are all of sound mind, and agree to do so, they can demand that the trustees bring the trust to an end and take their share. This is usually interpreted as ‘the beneficiary becomes entitled at 18 (16 Scotland)’. However, it is worth noting that the trust property is legally owned by the trustees and is not automatically transferred to the beneficiary when they reach 18. The trustees can continue to hold the trust property and distribute it to the beneficiary as and when it becomes necessary.