CLT into a discretionary trust

I have a client wishing to make a transfer into discretionary trust whereby they wish to be included in the class of potential beneficiaries. They are hoping to avoid the CLT at outset by doing it this way but I am pretty certain that the 20% charge no assets over the NRB would still apply.

Has anyone else a different view? Thanks for any advice.

Anne Slater-Brooks

Yes the 20% charge would still apply, assuming no other exemptions or reliefs are available. I wonder if your client is confusing this with the situation where a GWROB ends, eg if the settlor is removed from the class of discretionary beneficiaries, which is treated as a PET?

Diana Smart
Gordons LLP

iht is still chargeable, as you say, and it is also a GWROB.

Simon Northcott

Under the current IHT regime, I believe the only way an immediate IHT charge can be avoided is if the discretionary trust, or that part of the trust into which the transfer was settled, qualifies as a self-settlement trust for the disabled under s.89A IHTA 1984.

Even self-settlement into a simple life interest trust for the settlor now falls within the relevant property regime (which can pose significant issues for those UK domiciliaries working in the USA and who are being encouraged to enter into US style “living will” arrangements).

Paul Saunders

Thanks everyone. This was exactly what I thought too but I have not been as involved in trusts for the past few years so wanted to double check.

Have a great day

Anne Slater-Brooks