Berwick Devoil
Financial Solutions & Outsourcing

Discount Gift Trusts

These are a type of UK trust arrangement commonly set up in connection with an investment in either an onshore or offshore investment. The purpose is to gift a lump sum into a trust whilst retaining a lifelong ‘income’ from that money as withdrawals of capital. The clear and tactical aim is to reduce the immoral death tax. IHT (Inheritance Tax).

In strict legal terms, it is a type of Carve Out Trust, but the insurance industry has coined the phrase Discounted Gift Trusts which is how they are now colloquially known.

The key considerations here are the age of the settlors, state of health, overall value of estate, type of assets, life expectancy which varies dramatically across the UK, lifestyle, smoker status, income needs and capital requirements.

Used correctly it is a very powerful planning tool for parents and grandparents to draw an income from their investments throughout their lifetime, then to pass on the remainder to their beneficiaries.

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