Flexible Gift Trust

Mr B has an estate valued at £450,000 including £60,000 in liquid assets available for re-investment.  His Will leaves his estate to his children, and Mr B realises that they will have an IHT bill.

Mr B would like to mitigate the potential IHT bill.  He does not need the £60,000 in liquid assets.  He discusses with an adviser that whilst the value of investment bonds can fall, they do offer an efficient vehicle for IHT mitigation and he is happy to take this risk.  He therefore decides to set up a Flexible Gift Trust using an investment bond for the benefit of his children and gift the money away.

Mr B’s annual exemption for this year (£3,000) and last year is available, so this creates a chargeable lifetime transfer of £54,000.  As he has made no previous chargeable transfers, there is no IHT to pay, but he should complete an IHT 100 and IHT 100a form.

Provided Mr B lives for a further 7 years, the gift will fall out of charge with a saving of 40% of tax on £60,000 – a saving of £24,000 (at current rates).

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