The trust is expected to launch this summer and will be the sixth and final offshore trust to be added to the range which currently includes the discretionary discounted gift, bare gift; discretionary gift, bare loan and discretionary loan trust.
Technical manager Margaret Jago says: “This trust gives customers the best of both worlds from a gift and loan trust as you can keep back a regular income stream which is fixed from the outset.”
The trust is designed to give maximum flexibility to advisers who are looking to help their clients mitigate their inheritance tax liability.
Changes in the 2006 Budget mean that interest in possession trusts and accumulation and maintenance trusts have the same tax implications as discretionary trusts. This means that gifts to trustees of interest in possession trusts and accumulation and maintenance trusts are deemed to be chargeable lifetime transfers for IHT purposes rather than potentially exempt transfers.
Jago says: It is different from the loan trust as you are locked in so if you can put up with the relative inflexibility of that it is great as you make a gift from day one.”