The adviser considers the situation and identifies these important facts about Peggy -
- Any future grandchildren need to be potential beneficiaries meaning that a discretionary trust is required rather than an absolute trust.
- No lifetime access to the trust fund is required.
- Estate is in excess of the available Nil Rate Band and Residence Nil Rate Band.
- No previous Chargeable Lifetime Transfers (CLTs) have been made which means that Peggy can gift up to £325,000 with no lifetime IHT due.
- A tax efficient solution requires consideration of IHT and any other relevant taxes (in this case income tax).
The adviser recommends she invests into an Offshore Bond and places it into a discretionary Gift Trust. She learns that this type of trust is for those -
- Whose previous CLTs in the last seven years are below £325,000.
- Requiring no personal access to the bond whatsoever.
- Wanting flexibility with regard to those who will potentially benefit in the future.