A Flexible Reversionary Trust (FRT) is a highly flexible estate planning tool that helps reduce inheritance tax (IHT) while allowing you to retain access to capital if your circumstances change. One key benefit of using an FRT is its effectiveness for inheritance tax planning, providing both tax advantages and financial advantages for the trust creator and beneficiaries.
Unlike outright gifts, which permanently remove assets from your estate, an FRT strikes a balance between tax efficiency, inheritance tax planning, and financial flexibility.
A Flexible Reversionary Trust is a legal structure often used by individuals with larger estates who want to plan ahead for inheritance tax — but aren’t comfortable with giving up control entirely. A client can use an FRT to meet their estate planning needs by retaining access to capital while efficiently managing estate tax liabilities.
You place a lump sum (usually via an investment bond) into the trust, allowing clients to gift money into the trust. At set maturity dates, you have the option (not obligation) to withdraw funds. If you don’t take them, they remain in trust for your beneficiaries and may fall outside your estate after seven years.
This makes an FRT a popular solution for people who want to:
Compared to a discretionary trust, a Flexible Reversionary Trust offers more predictable access to capital and greater control for the settlor, while a discretionary trust gives trustees broader powers over asset distribution.
The new flexible reversionary trust is an innovative solution for modern estate planning, offering clients adaptable options for inheritance and tax efficiency.
It’s called “reversionary” because at each maturity, funds could revert to you if you choose — but if you don’t, they continue within the trust as deferred capital payments.
Flexible Reversionary Trusts (FRTs) help clients achieve their financial goals by allowing for adaptable estate planning that can be tailored to changing circumstances. Compared to loan trusts, which are another popular estate planning tool for inheritance tax planning and allow investment growth to be removed from the estate while offering some capital access, FRTs provide greater flexibility in how and when you can access or distribute assets.
Pros
Cons
An FRT works best if you:
As the settlor, you play a key role in establishing and managing the FRT, determining how assets are placed into the trust and how flexible your tax planning can be.
When considering if an FRT is appropriate, think about potential future needs, such as funding for a residential care home, as this may affect your financial strategy and estate planning.
It is strongly recommended to seek advice from qualified professionals before setting up a FRT to ensure your decisions are fully informed and tailored to your needs.
For more detailed information, case studies, and technical resources about Flexible Reversionary Trusts, please contact us.
A detailed review of your global assets, liabilities, and family objectives ensures every element of your estate is structured to minimise tax and protect wealth.
Utilising trusts, Family Investment Companies, and lifetime gifting, we help reduce exposure to Inheritance Tax (IHT), Capital Gains Tax, and other UK and international taxes.
Custom plans ensure seamless wealth transfer to the next generation, balancing fairness, family dynamics, and long-term financial security.
Strategies such as Asset Protection Trusts safeguard property and investments from creditors, divorce settlements, and market volatility.
For clients with cross-border assets, we provide integrated planning to manage multi-jurisdictional tax laws and ensure compliance worldwide.
The initial gift starts the seven-year IHT clock. Growth is outside your estate immediately, and if you survive seven years without withdrawals, the full capital is excluded.
Yes but only on the maturity dates you’ve chosen. You cannot withdraw funds on demand, which is why HMRC recognises the IHT benefits.
Typically, investment bonds (onshore or offshore). They’re chosen for long-term growth potential and tax efficiency.
The original gift may still be counted in your estate, but taper relief applies after year three. Growth remains outside your estate.
Yes. Any remaining assets stay in trust and are distributed according to your instructions, without being pulled back into your estate.
