IHTM42252 - The settlor: charge on the settlor

When a settlor makes a transfer into a discretionary or a non-qualifying interest in possession (IIP) trust or a special trust (other than a disabled person’s interest), that is an immediately chargeable transfer and the transfer is chargeable to inheritance tax (on the ‘loss to the estate’ basis) at lifetime rates as set out from IHTM14531.

If the settlor dies within 7 years of making the transfer, you must consider additional charges on the lifetime transfer. (IHTM14571)

Gift with Reservation (GWR)

If the settlor retains an interest in a discretionary settlement as a potential beneficiary, they retain a benefit in the gifted property. This is a GWR and may be included in the settlor’s estate on death. (IHTM42254)

Foreign Trustees

A living settlor may be held liable for trust charges if the trustees are resident abroad and do not pay any tax that is due (IHTA/S201(d)).