Gift & Loan Trust and Discounted Gift Trusts

Gift & Loan Trust

Using this type of trust allows an individual to access their original capital at any point and in any amount but the growth will not be included to their estate for Inheritance Tax purposes.

The outstanding loan remains in the settlor’s or donor’s estate for Inheritance Tax purposes. The loan can be waived in part or in full at any time.

Discounted Gift Trusts

A Discounted Gift Trusts is used for those individuals who wish to undertake Inheritance Tax planning but also need an income. It permits the gifting of a lump sum into a trust whilst retaining a lifelong ‘income’ from that money, with the objective of reducing any potential Inheritance Tax payable on death.

As long as income being withdrawn by regular withdrawals does not exceed 5% of the original investment and the total amount withdrawn in the individual’s lifetime is not more than 100% of the original investment there will be no immediate liability to income tax. In the event these limits are exceeded then a tax charge may apply.