DGT in a Discretionary Trust
DGT in a Bare Trust
Mrs Smith could pay the full £1.5million into a DGT within a Bare Trust, with a withdrawal rate of up to 5%, without an immediate IHT liability.
Mrs Smith would have to specific exactly who is to benefit from the Trust after her death at the outset and in what proportion, and this cannot be changed.
We have assumed that there would be an immediate discount to the estate of c.43% which amounts to c.£645,000. This immediately reduces IHT by c.£258,000.
The remaining c.£855,000 is classed as a PET gift. If Mrs Smith survives seven years from the point of the gift, the gift will not be subject to IHT, saving a further £342,000.
Mrs Smith can pay a maximum of c.£570,000 into a DGT within a Discretionary Trust, with a withdrawal rate of up to 5%, before it would trigger an immediate IHT liability.
Who benefits from the Trust on the settlor’s death is at the discretion of the Trustees.
We have assumed that there would be an immediate discount to the estate of c.43% which amounts to c.£245,000. This immediately reduces IHT by c.£98,000.
The remaining c. £325,000 is classed as a CLT gift that would fall within Mrs Smith’s NRB*. If Mrs Smith survives seven years from the point of the gift, the gift will not be subject to IHT, saving a further £130,000.