DGT

Question 1

Potential bens for N&J using DGT (12)

Answer 1

• no immediate IHT payable on set up
• as value is below NRB
• discount provides immediate reduction of IHT liability
• as they are both young and healthy
• the discount could be high
• growth immediately outside of the estate
• original gift to the trust is outside estate after 7 years
• immediately reduces the estate for RNRB
• meets their objective of reducing the IHT on second death
• 5% tax deferred withdrawals of original capital
• and can set these to start when Jane reaches 60
• non income producing
• so reduces admin/no tax return needed
• children can be named as potential beneficiaries
• ensuring the couples wish that the children receive the estate on second death is met

Question 2

Potential drawbacks of using DGT (10)

Answer 2

• lose access to capital
• decision can’t be reversed
• nicks discount is likely to be lower
• due to smoker
• and family health issues
• 5% tax deferred withdrawals would be based on original £130k
• rather than today’s value
• amount of income taken can’t be altered in future
• any unspent withdrawals form part of their estate
• they are young and may live past 20 years
• costs associated with the trust