IHT planning using Gift, Loan and Discounted Gift Trusts

To claim your CPD certificate, test your knowledge with the questions below.

Write down your answers to each of the following questions and check your answers when you click to claim your CPD certificate on the link below
 

1. John and Sue, from Essex, set up an absolute gift trust with their two children as equal beneficiaries. Both children were minors at the time but the oldest (Ben) will turn 18 next month. However, they don’t think he’s responsible enough to have the money at 18. When Ben reaches 18 can John and Sue, as trustees, delay distribution beyond Ben’s 18th birthday?

a) Yes

b) No

2. Tony set up a Discretionary Loan Trust with £330,000 ten years ago. He’s not had any loan repayments and hasn’t made any gifts of any kind previously. He now wants to waive the entire loan. Which of the following statements is true?

a) Waiving the loan will be a Potentially Exempt Transfer.

b) The trust was set up ten years ago so there’s no 7-year clock for IHT purposes.

c) Tony will incur an entry charge on the £5,000 over the nil rate band.

d) Tony will be making a chargeable lifetime transfer of £324,000.

3. Isla set up a Bare Discounted Gift Trust. Her adult children David and Clare are equal beneficiaries. The bond is approaching its 21st policy anniversary and the 5% withdrawals being taken to meet payments to Isla will result in an excess chargeable event. Who’s liable for the gain?

a) Isla only

b) Split equally between Isla, David and Clare

c) Isla liable for 50%, David and Clare liable for 25% each

d) Split equally between David and Clare

4. Erin transfers £200,000 into a Discounted Gift Trust and gets a 50% discount. Ben transfers £200,000 into a Loan Trust, then subsequently waives 50% of the loan. Both are discretionary trusts and both had two annual exemptions available when making their gift. Which of the following statements is true?

a) Erin’s chargeable lifetime transfer is £100,000.

b) Ben’s chargeable lifetime transfer is £100,000.

c) Erin’s chargeable lifetime transfer is £97,000.

d) Ben’s chargeable lifetime transfer is £94,000.

To claim your CPD certificate, test your knowledge with the questions below.

Write down your answers to each of the following questions and check your answers when you click to claim your CPD certificate on the link below
 

1. John and Sue, from Essex, set up an absolute gift trust with their two children as equal beneficiaries. Both children were minors at the time but the oldest (Ben) will turn 18 next month. However, they don’t think he’s responsible enough to have the money at 18. When Ben reaches 18 can John and Sue, as trustees, delay distribution beyond Ben’s 18th birthday?

a) Yes

b) No

2. Tony set up a Discretionary Loan Trust with £330,000 ten years ago. He’s not had any loan repayments and hasn’t made any gifts of any kind previously. He now wants to waive the entire loan. Which of the following statements is true?

a) Waiving the loan will be a Potentially Exempt Transfer.

b) The trust was set up ten years ago so there’s no 7-year clock for IHT purposes.

c) Tony will incur an entry charge on the £5,000 over the nil rate band.

d) Tony will be making a chargeable lifetime transfer of £324,000.

3. Isla set up a Bare Discounted Gift Trust. Her adult children David and Clare are equal beneficiaries. The bond is approaching its 21st policy anniversary and the 5% withdrawals being taken to meet payments to Isla will result in an excess chargeable event. Who’s liable for the gain?

a) Isla only

b) Split equally between Isla, David and Clare

c) Isla liable for 50%, David and Clare liable for 25% each

d) Split equally between David and Clare

4. Erin transfers £200,000 into a Discounted Gift Trust and gets a 50% discount. Ben transfers £200,000 into a Loan Trust, then subsequently waives 50% of the loan. Both are discretionary trusts and both had two annual exemptions available when making their gift. Which of the following statements is true?

a) Erin’s chargeable lifetime transfer is £100,000.

b) Ben’s chargeable lifetime transfer is £100,000.

c) Erin’s chargeable lifetime transfer is £97,000.

d) Ben’s chargeable lifetime transfer is £94,000.