DGT

Question 1

Recommend and justify a suitable trust to reduce estate but provide regular income

Answer 1

• DIscounted Gift Trust
• • discount underwritten bars on ages and health
• likely to be high as young and in good health
• discount immediately reduces the estate for IHT
• all growth outside the estate for IHT
• no IHT charge of gift is below available NRBs
• exit and period charges though will apply
• will be free of IHT after 7 years
• a fixed income is set up at outset
• if trust assets are an investment bond
• then income payment s are made on a tax deferred basis
• providing they don’t exceed their 5% allowances of original capital invested
• IB is non income producing
• reduces admin for trustees
• grandchildren Karen and Joshua could be added as lives assured
• which avoids a chargeable event on second death
• use a discretionary trust
• and make Karen, Joshua and grand children potential beneficiaries following second death
• provide instructions (letter of wishes) on how assets should be distributed on second death