Guide to the best start in life trust 10 A solution that is simple, flexible and tax efficient Mr Stevens realises that the value of his assets could expose his beneficiaries to a large inheritance tax (IHT) bill when he dies. He can afford to give away a substantial amount of money without affecting his lifestyle. He also wants to ensure that all his grandchildren benefit from a private education. Having considered Mr Stevens’ needs, his financial adviser proposes a Best Start in Life Trust. The Trust does not oblige him to specify the names of his beneficiaries at the outset, so it can be used, for example, to benefit any grandchildren as yet unborn. It also means that he can limit his potential IHT bill. Mr Stevens invests £325,000 in the Collective Investment Bond which is made up of 1,000 identical policies. The investment into the bond is spread evenly across all the policies so that they are all identical in terms of the amount of investment and the number of units allocated to them. Mr Stevens knows that any growth will now be outside his estate and he will not be subject to IHT on this amount. The Best Start in Life Trust is a discretionary trust so ongoing periodic and exit charges may apply. Mr Stevens completes a letter of wishes informing the trustees that he would like them to consider making school fee payments for each of his grandchildren. In September, the trustees decide to pay the school fee payments for one of the grandchildren Ben. After speaking to their financial adviser the trustees decide to complete a deed of appointment to appoint 100 policies for the absolute benefit of Ben before the trustees fully surrender the policies. The chargeable event gain arising from the full surrender is Ben’s only income in the tax year and is within the basic rate tax band. As gains on the Collective Investment Bond (like all bonds issued by UK insurers) come with a 20% tax credit there is no personal liability to income tax on this gain. When Mr Stevens dies aged 80, having lived for more than 7 years since creating the trust, the value of the trust is outside his estate and therefore free from IHT. Mr Stevens’ Best Start in Life Trust has saved his estate £130,000 (ie £325,000 x 40%) in IHT, not including the growth on the trust which is also free from IHT. I want to help my grandchildren through university. Example Mr Stevens is aged 68. He is retired, married, has three children and two grandchildren. Assets: – House: £600,000 – Savings and investments: £1,325,000 Income: – In receipt of state pension and private pension .