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Discounted gift trust - Discretionary

Overview

The client gifts money to a trust and receives regular fixed capital payments for the whole of their life or until the fund runs out – discretion to change beneficiaries.

Quick facts

  • For use with the Collective Investment Bond.
  • This is a trust which your client, the settlor, creates by means of a gift, but under the terms of which they retain the right to receive certain ‘income’ payments.
  • These payments may continue for the whole of their life, or until the fund has been exhausted.
  • Depending on the age and health of the settlor, and the amount of income required, there may be an immediate saving for inheritance tax (IHT).
  • The settlor chooses their trustees. They can also appoint themselves as a trustee.
  • After the death of the settlor (or both settlors where there are two), the trustees can distribute any remaining trust assets to the beneficiaries.
  • Classes of beneficiary are defined within the deed; for example, ‘children and descendants of the settlor’. Beneficiaries not covered by the classes can be added to the trust by the settlor.

Suitability

Technical support

  • IHT planning and a discounted gift trust - This article provides information about inheritance tax planning for UK-domiciled individuals, where a gift has been made and the individual still requires access to withdrawals.