Quilter 9 When the Settlor receives their entitlement The Lifestyle Trust is designed so there should be no IHT liability for the Settlor when they receive their entitlement to the Policy Fund. However, once the Policy Fund vesting date has passed, then the value of that Policy Fund will form part of the Settlor’s estate for IHT purposes. When the Settlor dies One of the conditions for receiving an entitlement to the Policy Funds is that the Settlor is alive on the date they become entitled to receive them. If not, the value of the Policy Funds that are yet to be vested will be outside the Settlor’s estate for IHT purposes assuming seven years have passed since the original gift was made. Discretionary trust taxation Discretionary trust taxation can be complex, but in summary: A chargeable lifetime transfer charge may arise on setting up a trust but only if the amount being settled exceeds the Settlor’s available nil-rate band A periodic charge may arise every 10 years; and An exit charge may arise when benefits leave the discretionary trust. This does not include benefits that the Settlor receives as entitlements. However, if the trustees make a payment to a discretionary beneficiary, this may be subject to this charge.