Lifetime trusts are often dismissed as “too expensive”.
This is usually said after it is too late.
What a lifetime trust actually does
It freezes value today.
Future growth sits outside the estate.
This is where the real tax efficiency lies.
Why timing is everything
If assets are transferred late:
- Entry charges may apply.
- Nil Rate Bands may already be used.
- Reliefs may be unavailable.
If transferred earlier:
- Growth escapes IHT.
- Ten-year charges are often lower than 40%.
- Planning options multiply.
The real cost comparison
Clients often focus on:
- 20% entry charges.
They ignore:
- 40% tax on full value later.
- Forced asset sales.
- Family disputes.
Lifetime trusts are not cheap. But late planning is almost always more expensive.
When lifetime trusts are appropriate
They work best where:
- Assets are expected to grow.
- Control must be retained.
- Partners need certainty.
- Long-term planning is accepted.
They are not for everyone. They are for people who plan early.
