Guide to the best start in life trust 6 The Best Start in Life Trust provides an estate planning solution The value of your gift into trust (the Collective Investment Bond) is categorised by HM Revenue & Customs as a ‘chargeable lifetime transfer’ (CLT) for inheritance tax (IHT) purposes. If the value of this CLT – together with any other such transfers you may have made within the previous seven years – exceeds the amount of your estate on which the IHT rate is zero (known as the nil-rate band – or NRB ), there will be a 20% tax bill on the excess at the outset. Once the bond is held in trust, any investment growth will not be part of your estate and therefore your estate will not be liable for IHT on any investment growth. After seven years there will be no IHT to pay on the CLT. If you die within the seven year period however, your estate may be liable for additional tax of up to 20%. The trust fund may also be subject to periodic and exit charges (see notes right). Maximum flexibility The trustees, as legal owners, have full discretion about making payments to the beneficiaries from the trust. The beneficiaries have no control over when the trust fund is paid. In fact there is no guarantee that any potential beneficiary will receive anything from the trust. Using a discretionary trust at the outset gives the trustees maximum flexibility to adapt to changing circumstances – such as one child requiring more course fees than the others or a child requiring money to pay a deposit for a house. Taking account of your wishes Although the trustees must use their own discretion over payments from the trust fund, you can indicate your own intentions and wishes about how you would like them to use the money held within the trust. Although not legally binding on the trustees, this ‘letter of wishes’ can be used to give them guidance on what you would like them to take into account when making future decisions. I want to help my niece with the cost of her wedding Important Note: The value of the Collective Investment Bond may go down as well as up and your beneficiaries may not get back what you put in.