Discounted Gift Trusts

[RubStick]

If you gift assets to your beneficiaries and live for 7 years the assets will not fall under the donors estate for IHT. A potentially exempt transfer has taken place.
If you set up a DGT theincome portion is exempt from your estate as IHT is raised on capital. The remainder is treated as a PET.
The only distinction between these two approaches at a functional level it seems to me is the DGT reduces the exposure through the wthdrawals leaving less to be exposed to the sliding scales should the donor die before 7 years is up. The balancing factor is the costs implied in setting up the trust, buying the single premium bond and managing and administering it for the future.
Therefore if you are prepared to take the risk a straight PET probably makes more sese i my mind. Would be very inerestedin any comments on this please.

[wallworkludlow]

I think the main advantage of the DGT is that the donor retains some access to their capital via the income payments. They also get an immediate amount (i.e. the discount) which falls outside of their estate from day 1.

[tax_schmax]

If you can afford to give the money away, you should do so. The DGT would throw income back into the estate of the settlor, if this is not spent, it goes back into the estate for IHT, removing the value of the "discount". As it is capital and not income, it can not be given away again as a gift out of income. Gifting the DGT income would be making a series of PET's .

If the settlor is going to live for more than 7 years, the discount is of little value, barring an accidental death. If the income is not needed, a DGT has no benefit.

If the beneficiary is not trustworthy, a trust would be useful. If the beneficiary is trustworthy, the donor would get to see their capital being put to good use.