Discretionary trust - settlor included

Though the trust remains as a part of the settlor’s taxable estate for IHT, the trust’s property is owned by the trustees. This means that the trustees are free to distribute the trust property to the beneficiaries before the executors of the settlor’s estate have been granted probate. The beneficiaries could use their share to pay the IHT on the settlor’s estate. For this reason, this type of trust is often referred to as a ‘Probate trust’.  It is important to note that this would require at least one additional trustee, who survives the settlor.

These trusts are most commonly used for investments where individuals don’t have an inheritance tax liability and want to be able to access their capital as they need to. The trust is not IHT efficient for IHT purposes because the value in the trust is still considered to be in the settlor’s estate.