Quilter 5 Why use a trust for IHT planning? Set up correctly, a bare trust offers one way to move money out of your estate and possibly reduce your potential liability to IHT. A gift of your assets into a bare trust is called a ‘potentially exempt transfer’ (PET) as it has the potential to be exempt from IHT after a seven‑year period. A trust can also avoid the prospect of lengthy delays often associated with administration of estates so that, in the event of your death, the people you want to benefit from your estate do so as quickly as possible. It allows you (the settlor) to gift your assets (which then become the trust fund) to a group of people (the trustees) for the benefit of those you want to provide for (your beneficiaries). With some careful planning, a trust can be a means of reducing or even eliminating a potential inheritance tax (IHT) bill. It is the responsibility of the trustees to take control of, manage and ultimately distribute the trust fund to your beneficiaries in accordance with the trust’s rules. A ‘bare’ or ‘absolute’ trust is one where the beneficiary/ies has/have an absolute interest in the trust fund. This means that the sole duty of the trustee is to hold the trust fund in line with the trust deed and transfer it to the beneficiary when required. What is a trust? Throughout this brochure, wherever we want to explain a particular term we highlight it in boxes like this on the page where the term is first used. We also use this method to draw your attention to any potential risks. Estate – This means all the assets that a person owns (or, in some cases, is treated as owning) at the time of their death, less their liabilities (debts). Your estate will also include the value of any property or assets you have given away if either the gift you have made is subject to conditions or restrictions, or you keep back some benefit yourself. If you die within seven years of making a gift, then these may also be included in your estate.