Investment Bond Trust or Trust in Will?

[4steve]

I am confused , I know if I set up a Trust for an Investment Bond no higher than £325000, and survive 7 years then no IHT will be payable by my children.

How does a separate Trust named in Will work? Can I just name the bank account where Cash held, and obtain same IHT free benefit of survive 7 years.

The advantage is I would not have to invest on risk based assets if name bank account, as opposed to investing in Life Company Bond.

Please could someone let me know the advantage/disadvantages of both routes, assuming Discretionary Trust being used.

Many Thanks
Steve

[AGoodman]

The point of setting up a trust (for your children/grandchildren) now is to remove the assets from your own estate in the hope you will then survive for 7 years. The point of the trust is merely to keep control of the funds while the beneficiaries are young - a direct gift to them would be just as good for IHT purposes.

If you set up the trust in your will then you must necessarily own the assets at the time of your death, which means they will be at risk of IHT. Will trusts aren't generally designed to save IHT on your own death.

You can of course set up a trust with cash or any other property but you would normally do it over a named sum rather than say the contents of a named account.

In case you aren't aware, the seven year period only starts running provided you are excluded from benefit under the terms of the trust. There are some bonds which are marketed as "estate planning" bonds which allow you some return of the initial funds during the life of the bond but you would need to take good advice if you want to replicate something like that using cash.