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Guide to Trusts

HSBC Gift Trust

Capital placed in a Gift Trust falls outside the client’s estate for Inheritance Tax purposes, provided the client lives for at least 7 years. The client has no access to money from the trust. The client would be a trustee of their Gift Trust so would be able to exercise control over how the trust fund is invested and, depending on the type of trust used, also have control over when a beneficiary can benefit from the trust.

HSBC Loan Trust

A cash sum is loaned to the trust to be invested. Any growth on that investment is outside the client’s estate for Inheritance Tax purposes. The client may take regular repayments of their loan to supplement their income. Upon death, any outstanding loan remains in the client’s estate for Inheritance Tax purposes.

HSBC Discounted Gift Trust

Capital is placed in trust and part of it may fall outside the Inheritance Tax estate immediately. The remaining part should fall outside the client’s estate after 7 years provided the client lives for a least 7 years from the date of the gift into the trust. The client retains access to regular payments from the trust during their lifetime or until the investment runs out.

Features and Benefits

Onshore investment bonds held in a trust provide a number of potential benefits:

  • Simple arrangement and administration
  • Tax efficiency.

Important Information

Trustee Investment

Onshore investment bonds held in a trust provide a number of potential benefits:

  • Simple administration. No tax returns or reporting/registration requirements unless a chargeable event arises
  • Capital gains generated within the bond are not subject to capital gains tax in respect of the bond holder
  • The 45% income tax rate which is applicable to discretionary trusts can be deferred until surrender – with a 20% tax credit for UK onshore investment bonds
  • Investment bond segments can be assigned to basic rate/non tax-paying beneficiaries whose tax on surrender will be based on their personal tax position
  • The trustee standard rate band is available if tax assessment falls upon the trust
  • Multiple lives assured provides flexibility and means onshore investment bonds can continue until the last life assured dies
  • Open architecture onshore investment bonds allow trustees to with work financial advisers to construct a suitable investment portfolio for the trust. Changes to risk profile and/or investment objectives can be accommodated without creating a chargeable event
  • Tax on underlying UK funds at a maximum 20% rate

Useful trust documents