SLG LiveSite Portlet

Discounted Gift Plan

Overview

Our Discounted Gift Plan is designed for clients who want to reduce the value of their estate and potential Inheritance Tax (IHT) liability, but want to continue to receive fixed withdrawals from these assets during their lifetime.

Discounted gift plan may:

  • Reduce estate value and IHT liability
  • Receive fixed withdrawals for life or until the fund is used up
  • Increase flexibility in choice of beneficiaries

How it works

The Discounted Gift Plan is easy to set up and to operate. It lets clients make a gift, and allows them to take fixed withdrawals from the investment for their lifetime or until the fund is used up. The value of the gift can be ‘discounted’ resulting in a lower IHT liability if the client dies within the first seven years.

The client establishes a trust, appoints trustees and may nominate beneficiaries. The gifted assets are passed to the trustees. who use the money to purchase a Standard Life Bond. The International Bond, Wrap International Portfolio Bond, Tailored Investment Bond, With Profits bond, or the Onshore Bond for Wrap can all be used with a Standard Life Discounted Gift Plan.

Lifetime access to withdrawals

To satisfy the rules of the trust, the client must take regular, fixed withdrawals from the Plan for the rest of his or her life, or until all of the fund is used up. The maximum annual withdrawal is 10% of the amount invested depending on the type of Standard Life bond selected.

While the client is alive, no other beneficiaries can benefit from the Plan.

Discounting the gift

We will ‘underwrite’ the client – considering the age and state of health of your client, and can place a discounted value on the gift. This is done to estimate the market value of the retained rights of the person who created the trust. The health evidence is used to establish the ‘discount’ that will apply. The discount figure is not guaranteed and HMRC may reduce the figure.

Types of trust

With the Discounted Gift Plan your clients can choose the type of trust that best suits their goals:

  • Discretionary trust – lets the client indicate who they would like to benefit from the Plan, but the trustees have the final choice
  • Flexible trust – lets the trustees choose who benefits from the beneficiaries defined in the trust. At outset your client will specify a main beneficiary or beneficiaries. They are entitled to any income and will benefit if the trustees don’t make any choice about the trust fund
  • Absolute trust – your client specifies the beneficiaries when the Plan is set up. These Beneficiaries can’t be changed by the trustees

Age limits

Clients must be no younger than age 50 and have more than six months until their 90th birthday to apply. The minimum investment is £60,000.

Benefits for your clients

  • May immediately reduce value of estate – if discounted, the value of the gift for IHT purposes can be less than the amount actually invested
  • IHT savings – the amount gifted into the Plan will fall outside the client’s estate after seven years. Any growth in the investments held in the Plan will be outside the client’s estate immediately for IHT purposes
  • Fixed withdrawals – the client receives fixed withdrawals for life or until all of the fund is used up
  • Flexibility – allows the client to select beneficiaries without including this in a will. For flexibility, a discretionary or flexible trust should be used
  • Payment on death - after the settlor(s) death, payment can be made to trustees without the need for Probate or Confirmation

Benefits for your business

  • Creates other business opportunities – by discussing the Plan with your clients, you are giving more comprehensive advice to your client and can start a wider estate planning conversation, which could lead to other business opportunities
SLG LiveSite Portlet
SLG LiveSite Portlet
SLG LiveSite Portlet

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