For many individuals considering estate planning, the Gifting Dilemma is a familiar challenge. On the one hand, they want to reduce the impact of Inheritance Tax (IHT) on their estate. On the other, they worry about losing access to their wealth too soon, especially with uncertainties around future financial needs. 

This is where a Flexible Reversionary Trust (FRT) comes into its own—a planning tool that allows individuals to make gifts for IHT efficiency while retaining an element of control and access. 

Solving the Gifting Dilemma 

Outright gifts can be effective for IHT planning, but they come with risks. Once an asset is given away, the original owner no longer has any claim to it. If circumstances change—unexpected expenses, care costs, or simply a need for extra funds—there’s no way to reclaim the gifted wealth. 

A Trust provides an elegant solution. It allows the Settlor (the person creating the Trust) to make a gift but with the option of future access, should it be needed. The structure ensures that assets are placed outside of the estate for IHT purposes, while still offering the flexibility to receive periodic payments if required. 

How It Works 

Funds are placed into the Trust, and the Trustees (which can include a professional Trustee such as WAY Trustees Limited) manage the assets. The key feature is the creation of reversionary interests, which means portions of the Trust fund can be scheduled to revert back to the Settlor at pre-set intervals. If the funds are not required, the Trustees have the power to defer payments, keeping the assets protected and growing within the Trust. 

Key Benefits 

• ✅ IHT Efficiency – After seven years, the gift is fully outside the estate, reducing potential IHT exposure. 
• ✅ Retained Access – Future financial security is preserved through scheduled reversions. 
• ✅ Flexible Control – Trustees can defer payments to keep funds protected if they are not needed. 
• ✅ Protection for Beneficiaries – Assets remain within the Trust, offering an extra layer of protection from external risks such as divorce or financial mismanagement. Additionally, a loan facility can be provided to Beneficiaries instead of outright distributions, ensuring that funds stay within the protection of the Trust while still being available for responsible use. 

A Smart Solution for Uncertain Times 

A Flexible Reversionary Trust provides the best of both worlds—tax-efficient gifting with built-in adaptability. For those hesitant about parting with wealth permanently, it serves as a true flexible friend, balancing estate planning needs with financial security. 

If you’d like to explore how an FRT could work for your clients, contact WAY Trustees Limited today.