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Excess income trust

Overview

A discretionary trust that uses a client’s excess income to build a nest egg for beneficiaries in the future, free of IHT.

Quick facts

  • For use with the Collective Investment Bond.
  • Available under the law of England and Wales and Scots Law.
  • A planning solution using the Discretionary trust - Settlor excluded trust.
  • Allow your clients to make use of the ‘normal expenditure out of income’ exemption by using surplus income to make gifts to a discretionary trust.
  • This is a trust where your client, the settlor, cannot be included as a beneficiary.
  • The settlor chooses their trustees. They can also appoint themselves as a trustee.
  • Classes of beneficiary are defined within the deed - For example ‘Children and decedents of the settlor. Beneficiaries not covered by the classes can be added to the trust by the settlor.
  • The trustees use their discretion to decide who may benefit from the trust and when.
  • The beneficiaries cannot demand their rights from the trustees.

Suitability

Inheritance tax

This planning solution can be suitable for inheritance tax (IHT) planning as it moves the client’s assets outside of their estate for IHT purposes. Any gifts not covered by the normal expenditure exemption will be considered outside the estate after seven years.

Succession planning

Often used by families for succession planning, the wide class of beneficiaries means spouses, along with existing and future children and grandchildren, are included automatically. If the classes of beneficiaries do not include individuals who the client would want to benefit, they can be added to the trust deed.

The settlor

The settlor cannot benefit from the trust; therefore it would be unsuitable for a client who requires income or access to capital.

Setting up the trust

The Excess Income trust is a planning solution using the Discretionary trust - settlor excluded.

Here you will find the trust deed and trust deed completion guide. 

Discretionary trust (English law) - settlor excluded

Trust deed for the Discretionary trust - settlor excluded. English law version.

Discretionary trust - settlor excluded

English law trust deed completion guide

Please take a moment to read the completion guide before submitting the trust deed. The guide will address common concerns and queries, helping to ensure this important document is completed correctly.

English law completion guide

Discretionary trust (Scots law) - settlor excluded

Trust deed for the Discretionary trust - settlor excluded. Scots law version.

Discretionary trust - settlor excluded (Scots law)

Scots law trust deed completion guide

Please take a moment to read the completion guide before submitting the trust deed. The guide will address common concerns and queries, helping to ensure this important document is completed correctly.

Scots law completion guide

Guides and helpful documents

Technical support

A review of our trusts

View Quilter's range of trusts, with varying levels of access, flexibility and inheritance tax (IHT) efficiency to help meet the needs of your clients.

View range of trusts

Gain expert knowledge

Gain knowledge by reading helpful trust articles from our technical team supporting you on all your trust decisions.

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