Trusts

Question 1

DGT
1. Initial Action
1. Access
1. IHT

Answer 1

1. Gift into either a bare trust (PET) or discretionary trust (CLT)
   Investment bond typically used.
2. Fixed income stream without triggering gift with reservation or pre-owned asset tax rules.
   No access to capital.
   Exhausted after 20 years if 5% withdrawals taken.
3. Immediate IHT saving via initial discount based on health and income.
   Medical underwriting required.
   Capital is outside of the estate after 7 years.

Question 2

Loan Trust
1. Initial Action
1. Access
1. IHT

Answer 2

1. Loan to a discretionary trust.
   Investment bond typically used
2. Access to loan capital at any time.
   Can take income stream if required via loan repayment.
   Withdrawals exhausted after 20 years if 5% taken annually.
3. IHT benefit takes time – loan remains in the estate until repaid.
   Growth is outside of the estate.
   IHT benefit builds over time.