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HMRC internal manual

Inheritance Tax Manual

Flexible Reversionary Trusts: further details

The mechanics of setting up a flexible reversionary trust vary from provider to provider. Some arrangements provide for the bond or policies to be placed directly into a trust which sets out the rights of the settlor and those of the beneficiaries. Others put the policies into bare trust for the settlor and then assign the equitable rights under the policies to a trust which sets out the respective rights of the settlor and beneficiaries.

In either case, provided the settlor’s retained rights are carved out from the property that is gifted then the arrangement will not be a gift with reservation (IHTM14301). In addition the settlor’s retained rights do not give rise to a charge under the pre-owned assets legislation (IHTM44000).

The settlor will have made a transfer of value which is equal in value to the full sum invested when the flexible reversionary trust is set up.