Private Family Family

• Discretionary Trust.

The Holding Trust is one in which the settlor, from the outset intends to place certain assets in the trust and ask the trustees to hold and protect them until the time when they need to be resettled or distributed. This is the most obvious choice of trust for management of the family wealth. The discretionaly deed of trust is designed to take into consideration all the succession alternatives but should be drafted carefully reflecting the settlors particular wishes and the beneficiaries needs.

• Interest in Possession Trust

An Interest in Possession (IP) trust is one in which trust income must be paid to a particular beneficiary ("the life tenant").

This contrasts with the situation with a discretionary trust is one where trust income and capital may be paid to one or more of a class of beneficiaries, as the trustees think fit ("at their discretion"), without significant restriction.

Such a trust might be used simply because it is desired to pay all the income to the life tenant but a lifetime gift to an IP trust is a potentially exempt transfer so the gift will not give rise to UK Inheritance Tax (IHT)  if the donor survives the gift by seven years. The property is treated as if it belonged to the life tenant and will be subject to tax on his or her death unless exempt or within the nil rate band.