Our Lifestyle Trust 6 How the Lifestyle Trust works The Lifestyle Trust has been designed to reduce potential inheritance tax liability while also providing the Settlor with as much flexibility as they may require in respect of future payments from the trust fund. It is effectively split into two elements: The discretionary trust that lets the Settlor pass on some of their wealth tax-efficiently to their chosen beneficiaries The Settlor’s interest (in the form of access to a pre-agreed series of payments, (referred to as ‘entitlements’)). Invest in a single premium bond. The client invests in a Collective Investment Bond (CIB), which is a single premium life assurance bond from Quilter, with the intention of achieving long-term capital growth. The CIB is made up of 1,000 identical policy segments. This allows greater flexibility and tax-efficiency when taking withdrawals. For example, an investment of £100,000 is divided across 1,000 policies, each worth £100 at outset. Neither the Settlor nor the Settlor’s spouse should be included as lives assured on the bond. 1 Specify the entitlement schedule. At this stage the client will be required to specify how they wish the schedule of future entitlement payments to work. You should discuss with your client how best to structure this part of the trust deed, known as the ‘Second Schedule’. (Please see ‘The Settlor’s interest in the entitlements’ on page 7 and our illustrative example on page 10). 3 Transfer the bond to the trust. Once a bond has been set up, a request is made to gift it into a Lifestyle Trust and legal ownership is transferred from the client to the trustees. 2 Consider writing a letter of wishes. The bond then forms the trust fund. The trustees have discretion to decide whether potential beneficiaries will benefit from the trust fund and when. The Settlor can decide to complete a ‘letter of wishes’ addressed to the trustees to give them guidance to take into account when making future decisions about the trust. The letter of wishes is not legally binding. Apart from their interest in the ‘entitlements’, the Settlor cannot benefit from the Lifestyle Trust in any other way. 4