GWROB and DTs

[Paula Henderson]

I know that if the an individual makes a gift to a DT that it its a GWR and the DT is included in his death estate.
However, if that is the case, does the DT still pay exit charges and 10 year charges.
All I have been reading says it does, but I cannot see anywhere that enables you to get credit for these charges if he dies.
From what I understand, there are two calcs done at death.
1. Including the DT in the death estate
2. Allowing the gift and calculating IHT on that
Whichever produces higher tax is the charge that stands.
Now if you use 1 would that not mean that you can get credit for the exit charges etc,

[maths]

I know that if the an individual makes a gift to a DT that it its a GWR and the DT is included in his death estate.
However, if that is the case, does the DT still pay exit charges and 10 year charges.

A gift into a DT is not automatically a GWR; it is a chargeable lifetime transfer (CLT) possibly subject to IHT at 20%.

It only falls to be treated as a GWR if the settlor can benefit under the trust.

Assuming that he can so benefit the gift is still a CLT and the DT is subject to 10 yearly and exit charges.
On death the trust property is part of the settlor's estate for IHT purposes (X).

If death of settlor occurs within 7 years of gift into trust an additional IHT charge at 40% arises on the gift (Y).

The greater IHT charge under X or Y is used.

[Paula Henderson]

Yes, I meant to say if the settlor had an interest in the DT.
If there are 10 year and exit charges, is there any relief for those at death as the settlor will still have it in their estate?

[maths]

Not as far as i am aware.

The settlor's IHT exposure and those of the trust are separate; not quite the same as settlor interested trust for income tax where effectively trustees have no liability and hence settlor gets tax credit for any income tax they discharge (on behalf of the settlor).