July 12, 2026
A Valuable Option — But Not Always the Right One
At Matrix Estate Planning Ltd, many clients approach us after seeing online advice suggesting that lifetime trusts are the simplest way to protect assets and reduce inheritance tax. While lifetime trusts can be extremely effective, they are often misunderstood, and they are certainly not a one‑size‑fits‑all solution.
Estate planning is personal. What works perfectly for one family may be unsuitable for another. This is especially true when considering lifetime trusts.
Lifetime trusts are frequently promoted as a way to:
• Protect the family home
• Reduce inheritance tax
• Avoid probate delays
• Prevent future care‑fee assessments
• Maintain long‑term control over family wealth
Although lifetime trusts can achieve some of these aims, they must be used carefully. The type of trust, the value of the assets, and the individual’s wider estate all influence whether a lifetime trust is appropriate.
Certain lifetime trusts fall under the Relevant Property Regime, which means they may trigger inheritance tax charges at different stages. These charges often come as a surprise to clients who have only seen simplified online explanations.
1. Entry Charge
When assets are transferred into a lifetime trust, anything above the available nil‑rate band (£325,000 for most individuals) may be subject to an immediate 20% inheritance tax charge.
For example:
Transferring £500,000 into a trust could create a taxable amount of £175,000.
At 20%, this results in £35,000 payable upfront.
This is one of the most commonly misunderstood aspects of lifetime trusts.
2. Ten‑Year Anniversary Charge
Every ten years, the trust is reviewed.
If the trust’s value exceeds the available nil‑rate band at that point, a charge of up to 6% may apply.
This ongoing charge is rarely mentioned in online discussions about trusts, yet it can significantly affect long‑term planning.
3. Exit Charges
When assets leave the trust — usually when beneficiaries receive funds — an additional charge may apply, again up to 6%, depending on timing and value.
Absolutely. Lifetime trusts can be extremely powerful when used correctly. They can:
• Protect vulnerable beneficiaries
• Provide long‑term control over how assets are used
• Ring‑fence wealth from certain risks
• Support structured family‑wealth planning
• Offer flexibility for future generations
However, they must be tailored to the individual. A trust that is perfect for one family may be entirely unsuitable for another.
Lifetime trusts are not automatically the best option — they are specialist tools that need careful consideration. Understanding how they interact with inheritance tax rules is essential before making any decisions.
At Matrix Estate Planning Ltd, we help clients make informed choices based on clear, accurate advice rather than generic online guidance.
We offer home visits across Sheffield, Rotherham, Doncaster, Worksop, and Nottinghamshire, as well as appointments at our office in South Anston.
If you would like to discuss lifetime trusts, inheritance tax planning, wills, or lasting powers of attorney, please get in touch. We are here to help you make confident, informed decisions about your estate.
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