Discounted Gift Trust
FPIL's Discounted Gift Trust (DGT) allows UK domiciled individuals to gift a policy into a trust, receive an income for life (or until funds have been exhausted) and, subject to successful medical underwriting, immediately reduce the value of their estate for UK Inheritance Tax (IHT) purposes.
How the DGT works
- Client completes a Health Questionnaire and is underwritten;
- Client (the settlor) assigns an FPIL policy to a DGT. Policy is now the Trust Fund;
- Value of withdrawals (The Discount) under DGT calculated based on the underwriting decision;
- The ‘Discount’ is deducted from transfer value into DGT to give a ‘Discounted Value’;
- Only the ‘Discounted Value’ and NOT the actual value of transfer when policy assigned into DGT are included in the estate for IHT should death occur in first 7 years;
- After 7 years the ‘Full value’ is outside of estate for IHT;
- Any growth on the Trust Fund is immediately outside of the estate for IHT.