Any ideas what kind of trust this could be?

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15 years ago MIL died and FIL decided to downsize. He bought outright and put the remaining money (£225k) from the sale of his previous home into some kind of investment trust. DH and his other son will get the money (free of inheritance tax) when FIL dies.

Any ideas what kind of trust this could be and how it might have performed? FiL does take some of the interest as income.

If they were a normal family DH could just ask, but they're not ...

Could be almost anything!

All you know is it's some kind of income-producing product
It could be one or more of a trust/bond/gilts/shares/ISA/Pension fund or any other financial vehicle that pays an income to the holder.

I know, it was a shot in the dark!

Is it likely to grow as well as produce income?
Reason I'm asking, DH has got this half cocked idea of switching to an interest free mortgage for a few years "safe" in the knowledge that we will get this money one day.

www.gov.uk/trusts-taxes/types-of-trust

I think there are 2 things here OP.

• the type of trust the investment is in (see above link)
• the investment itself (could be anything)

Is this a life interest trust (in the legal sense) rather than where the funds are held? From my limited understanding, I don’t think this saves inheritance tax.

A separate question is where this is held and what returns these are making.

I would caution against banking on this until he clearly understands what it is.

It sounds like a reversionary life interest trust.

You are mixing up vocabulary by using the term ‘investment trust’ as that is a separate type of investment vehicle and not a ‘Trust’ as you are thinking of it. It could indeed be an Investment Trust but as a PP said that wouldn’t be outside of his estate unless that itself were held in a Trust.

Unless you know what it is and the numbers involved an interest only mortgage on that basis is insanity.

No, FIL was quite clear that if he lived over 7 years we would avoid IHT.

What worries me is that a few years ago he gave DH and his brother £70k each out of the blue (as you do!). Could this have come out of the trust?

@Dindundundundeeer

Unless you know what it is and the numbers involved an interest only mortgage on that basis is insanity.

I agree! I think DH is having some kind of lockdown induced midlife crisis!

No lender will accept a potential inheritance as a repayment vehicle.

If it was arranged as a proper trust the most likely options will be either a discounted gift trust or a (gift and) loan trust. If he is taking an income and it was arranged 15 years ago, the trust assets could be run down, particularly in a discounted gift trust. In the loan trust it really depends on the size of the actual gift/loan.

A reversionary trust is no good for IHT planning.

Reversionary Lifestyle Trust is a product, and is 100% IHT planning. It is legally and therefore taxed as a discretionary trust.

Don’t rely on money til it’s in your bank!