Malcolm Finney takes a look at a valuable inheritance tax planning option.
Insurance often underlies a number of planning techniques designed to mitigate inheritance tax (IHT) liabilities. The ‘discounted gift trust’ (DGT) is one example. The DGT is not too dissimilar to another commonly used planning option, the ‘loan trust’, albeit that the former involves an immediate reduction in the value of the donor’s estate (i.e. due to the discount element of the gift), whereas the latter involves no such reduction (i.e. due to the making of a repayable loan).
The setting up of the trust (typically, a discretionary trust) involves a gift which constitutes a chargeable lifetime transfer (CLT) or potentially exempt transfer if a bare trust is utilised.
The value of the
