Understanding Discounted Gift Trusts
Up to 60 CPD minutes
Introduction
This module should take around 60 minutes to complete. It includes a short self -assessment quiz to test what you have learned and a 60 minutes CII/PFS accredited CPD certificate can be claimed.
Outcomes
- Explain the different benefits and considerations when using single and joint settlor DGTs
- Describe how a discount reduces a gift’s value for IHT and the factors which can impact any discount offered
- Determine the potential tax charges which could apply to a DGT during the settlor’s lifetime and following their death
Learning material
CPD minutes: up to 60
Post learning assessment
Question 1
a. Under a joint settlor plan, the full amount of retained payments will usually continue after the first settlor’s death.
b. Single settlor DGTs could be deemed as gift with reservation if a spouse can benefit during the settlor’s lifetime.
c. Using single settlor trusts is practical where each settlor wants to name different beneficiaries and/or trustees.
d. Joint discounts are based on combined life expectancy, split equally between the settlors - so would give same discount as two single settlor DGTs.
Question 2
a. The life expectancy of any beneficiary.
b. The level of fixed retained payments chosen.
c. The cost of insurance on the settlor’s life to protect the income stream in event of early death.
d. Whether income tax will be due on any fixed retained payments.
Question 3
a. £500,000.
b. £325,000.
c. £400,000.
d. £525,000.
Check your answers
Any reference to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.