The Royal London Select Discounted Gift Trust (DGT), is trust-based, rather than product-based, to allow greater investment flexibility and can be used in conjunction with the Royal London 360° Selected investment bond.
It has the option to defer income or to provide an income for the lifetime of the Settlor (or until such time as the trust fund is exhausted) and accepts further transfers after the trust has been created.
In addition, alongside the trust, it is possible to set up an Access Fund which allows an investor to set aside a certain proportion of capital which is held by the trustees in order to meet future unforeseen spending needs.
If the Access Fund is found to be too large or no longer required, this capital can be gifted to the trust fund for the beneficiaries, further reducing the size of the Settlor’s estate for IHT purposes.
The Select DGT can be established on either a ‘bare’ or ‘flexible’ beneficiary basis and with single or joint Settlors. If set up on a ‘bare’ basis the value of the Gifted Fund is classed as a Potentially Exempt Transfer for UK IHT purposes.
If the policyholder survives for seven years after creating the trust, the value of the Gifted Fund becomes exempt from UK IHT assessment. If set up on a ‘flexible’ basis the transfer of capital to the trust is termed as a Chargeable Lifetime Transfer.
If the value of the Discounted Gift is more than the available nil rate band (currently £325,000), the excess will be liable for UK IHT at 20%.
Natalie Dutton, head of marketing at Royal London 360°, said: “The Select Discounted Gift Trust has been designed for ease of use by financial advisers and investors alike, whilst at the same time introducing features not found on other schemes currently available.
“DGTs are tried and tested planning in the market place, and as such are a popular choice for advisers looking to assist their UK domiciled clients in reducing a potential UK IHT liability.”
