On-Demand Events
IHT planning using Gift, Loan and Discounted Gift Trusts
20 Jun 24 90 min watch
Inheritance Tax is perhaps the best example of the fiscal drag that is increasing taxes in the UK. The Nil Rate Band has remained at £325,000 since 2009 and the government has said it will remain frozen at this level until at least 5 April 2026.
Often called a "voluntary tax" as there are many ways to legitimately avoid it, but nonetheless receipts are consistently on an upwards trajectory.
In this session Les Cameron, Head of Technical and Barrie Dawson, Senior Technical Manager at M&G Wealth look at the current IHT landscape and how Gift Trusts, Loan Trusts and Discounted Gift Trusts can help overcome the key objections to IHT planning.
Les Cameron (Head of Technical, M&G Wealth)
Barrie Dawson (Senior Technical Manager, M&G Wealth)
Discover how Gift, Loan and Discounted Gift Trusts can help clients achieve their IHT mitigation objectives.
90 minutes | Structured CPD accredited by CII
Learning outcomes
By the end of this session, you will be able to:
- Describe the current IHT landscape and why receipts are rising
- Explain how trusts can be used to overcome the objections to gifting and reduce a persons IHT liability
- Describe the operation of Gift, Loan and Discounted Gift Trusts
Claiming your CPD
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.
- 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
- 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.
- 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
- 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.
Before collecting your certificate, please take a moment to provide us feedback on this session, please email prudential.distribution.team@prudential.co.uk
Complete the form below and we’ll email your CPD confirmation to you. Please use the email address that you would usually use when contacting us.
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