Gift
Trust

An independent review by our team of experts

A gift trust is a special legal and fiduciary arrangement that allows for an indirect bequest of assets to a beneficiary.

A gift trust provides an IHT planning route for those who want to make an outright gift in a tax-efficient way.

Some individuals are averse to making substantial gifts directly to minors. For example, if they have young children, they may want the children to inherit the money at an age when they are more ﬁnancially mature, or they may want to gift away money without affecting their spouse’s access to the funds.

Key features of a gift trust:

Any gift that exceeds the annual gift tax exclusion amount is liable for tax but the Gift Trust helps evade it.
This type of trust is typically used by parents or grandparents who want to establish a trust fund for their descendants.
Using a gift trust, you can make a gift without giving up full control over the assets gifted.
The trust can be established with single or joint settlors.
The person appointed as a settlor does not automatically become a trustee neither a beneficiary.

Who the gift trust is suitable for:

The gift trust is suitable to anyone who is UK domiciled or deemed UK domiciled for IHT purposes and who is capable of gifting capital, without the need to access it in the future.
Establishing the trust as a bare trust would be suitable for individuals who want to create a potentially exempt transfer for IHT purposes, who have specific beneficiaries in mind and do not want to report requirements to HMRC.
Establishing the trust as a discretionary or flexible trust would be suitable for settlors who might want to change their choice of beneficiaries in the future and who want to create a chargeable lifetime transfer for IHT purposes.

Advantages and disadvantages of a gift trust:

If you are looking to secure your future generations finances and gain tax benefits while doing so then this trust can help. Understanding the rules and regulations of gifting can add value to the grantors and the beneficiaries.
One of the drawbacks to a Gift Trust is that the long-term wealth creation capacity of the fund can be affected when sizable sums are given to beneficiaries (children in particular). This can be bypassed by setting restrictions, such as limiting the amount or frequency of withdrawals or ending future gifts to beneficiaries who withdraw funds immediately.

NOTE:

We would highly recommend reading the 'expert verdict' section of this review to make an informed decision.

Additionally, here's a free guide that can help you achieve better results. In this guide, you'll learn:

Academic evidence only shared with a select few firms across the world
A real-life example of why you should never try to outguess the market
Why a fund's past performance is not enough to predict future returns
Why you need to focus on what you can control and why this leads to a better investment experience
Why you should accept the markets for what they are
What can impact behaviour and make people seek instant gratification

The Pros

> Inheritance tax planning: growth on the gifted money is immediately outside of your estate. The gift is fully outside of your estate after 7 years

> Choice of trust: the trust can be written on either an absolute or discretionary basis, to suit your requirements

> Probate: trustees can access the assets immediately upon death

> Suitability: the gift trust is suitable if you do not require any access to the capital or any growth from the trust. Payments can be made to trust beneficiaries at any time (but not for your own benefit)

The Cons

> Potentially expensive

> Seek help from a professional financial planner

Should I use a gift trust if I will need access to my assets?

No.

A gift trust should not be used if you may need access to your capital.

If you require access, other solutions may offer some protection from inheritance tax (IHT).

You can find all our independent reviews of international trusts here.

When is a gift trust used?

A gift trust is commonly used by parents or grandparents who want to establish a trust fund for their children or grandchildren.

A gift trust is a viable method to avoid taxes on gifts that exceed the annual gift tax exclusion limit.

Expert assessment of a gift trust

A gift trust can be a useful solution, but whether it is applicable has to be determined on a case-by-case basis, as does the case for using trusts in general.

If you already have a trust structure in place and would like a Second Opinion - or, if you are wondering whether the utilisation of a trust could be of benefit to you, contact us.

NOTE: Because trusts are so unique to each individual, it’s impossible to give them a rating for their overall performance and suitability. Therefore these reviews do not come with a star rating.

The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or, representation as to accuracy or completeness. Information and opinions presented in this material have been obtained or derived from sources believed by AES to be reliable and AES has reasonable grounds to believe that all factual information herein is true as at the date of issue. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorised reproduction or transmitting of this material is strictly prohibited. AES accepts no responsibility for loss arising from the use of the information contained herein.

‘AES’ refers to the AES Group’s separate but affiliated entities generally, rather than to one particular entity. These entities are AES Middle East Insurance Broker LLC registered with the UAE Ministry of Economy, United Arab Emirates, Licence no. 571368, and Commercial Registration no. 75162 and regulated by the UAE Central Bank license no. 189; AES Financial Services Limited, incorporated and registered in England and Wales with company number 06063185, authorised and regulated by the UK Financial Conduct Authority FRN: 464494; AES Financial Services (DIFC) Ltd, registered in the Dubai Financial Centre (DIFC) as a foreign company, license no.2128, and regulated by the Dubai Financial Services Authority (DFSA) Reference No F003476; AES International Limited, a private company incorporated and registered in the British Virgin Islands with company number 1839872; AES International Global Limited, a private company incorporated and registered in the British Virgin Islands with company number 1887885. Please visit our authorisations page for further information on regulation, redress and accessibility.

If you are outside the UK and we advise you or carry out other business, nearly all the rules, regulations and arrangements made under the UK regulatory regime (including the rules made by the FCA and the dispute resolution process provided by the UK Financial Ombudsman Service) will not apply to most aspects of the service you receive, such advice or business being provided from outside the UK. You should therefore clearly understand such rights and protection as are afforded in the jurisdiction where you receive advice. Local law, regulation and redress processes will apply in almost all cases, and will be different from that of the UK.

RISKS

Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investment, when redeemed, may be worth more or less than the capital invested. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful. For further information, please click here.

Gift
Trust

An independent review by our team of experts

REVIEW SUMMARY