Quilter 3 Glossary Available nil-rate band – The value of the nil-rate band minus any previous chargeable lifetime transfers made by the Settlor in the last 7 years. Bare trust – A trust where the beneficiaries are named at outset and cannot be changed at any time in the future. At age 18 the beneficiary can demand their share of the trust fund. Beneficiary – Someone who will or may benefit from a trust fund. Chargeable event – A liability to income tax may arise if a chargeable event occurs. A chargeable event for a non-qualifying policy arises on: a) death of the relevant life assured, b) partial withdrawals across a whole policy or bond which exceed the 5% per annum allowance, c) maturity or cash-in of a policy. Chargeable lifetime transfer – A transfer of value which is made by an individual and is not an exempt or potentially exempt transfer. If the transfer exceeds the available nil-rate band of the transferor then a charge of 20% on the excess is payable. A transfer into a discretionary trust is a chargeable lifetime transfer. Discretionary trust – A trust that your client, the Settlor, creates by means of a gift and to which beneficiaries can be added. The trustees use their discretion to decide who may benefit from the trust and when. The beneficiaries cannot demand benefits from the trustees. Estate – All the assets that a person owns, in full or part, at the time of their death. Exit charge – If an entry charge or 10-yearly periodic charge has given rise to a tax charge, an exit charge will be paid on any distributions made by the trustees out of the trust fund. The rate charged is dependent on the entry and 10-yearly periodic calculations but can never be greater than 6%. Nil-rate band – The value of an individual’s estate that is not chargeable to UK inheritance tax (IHT). The amount is set by the Government and is currently £325,000, which is frozen until 2026. Periodic charge – Every ten years the value of the trust, less the available nil-rate band, will be assessed for IHT at a maximum rate of 6%. Policy Fund – A group of individual policies which the Settlor has asked to be entitled to at a pre-defined future date – the Vesting Date. Potentially Exempt Transfer (PET) – Some gifts are considered as PETs and are not liable to immediate IHT. These can be outright gifts, or gifts into bare trusts. After seven years the PET will fall outside your client’s estate for IHT purposes. However, should your client die within seven years, the PET will become chargeable and IHT will be due at 40% * on the gift amount after deduction of any available nil-rate band. * Taper relief may reduce the tax due. Second schedule – The Lifestyle Trust deed is a document which includes four sections known as ‘schedules’, in which the provisions of the trust and its management are detailed. The Second Schedule is where the Settlor specifies the future entitlements they will receive and when they will be able to access them. Settlor – The Settlor is the person or persons who sets up the initial investment. The Settlor(s) transfers the ownership of the assets to their chosen trustees. Trustee(s) – The person/people/ firm to whom the Settlor transfers the trust assets and who administer the trust. Vesting Date – The date on which the Settlor becomes entitled to a Policy Fund.