Charitable trust with income to family first?

I have a client who would like to do two things - leave money to charity, for inheritance tax savings, and secondly retain the income during his lifetime, with the income to continue for two children until they die, before fully reverting back to the charity.

I see no way all of these can be achieved, as the capital would have to be held for the children at least, to provide the income, but wondered if there were any potential ways to achieve this? He could leave a capital sum (or in this case a commercial property) to a charity in trust, to but I can’t see how he can claim any IHT allowances if the income goes to children first. Is there anything out there that can come close?!

The intention behind this appears very closely aligned to a concept known as ‘Waqf’ under Islamic law, often equated to a permanent endowment. I dont believe there is any UK equivalent that allows you to benefit from the IHT allowances, but if this asset forms a part of the overall planning then there may be some manipulation that can be effected. You may also wish to consider capitalising the value of the life interest/right to income of the children vis-a-vis the capital of the trust. Not ideal, but perhaps close?

That’s really interesting Haroon - I will read up on that, but giving a capital sum may be the only alternative, if he wants to try and get some charity exemptions. Thank you.

I wonder if a discounted gift trust with a charity being the sole beneficiary of the trust would work

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals