Discounted Gift Plan Study Guide Flashcards
The discounted gift plan.
The purpose of the discounted gift plan, whether it is the UK or the international version, you still owe clients to make a discounted gift of capital, thus reducing the size of their estate for IHT purposes, while providing them with a fixed income for the rest of their life.
describe how the DGP works?
- The client (Settlor(s)) Invest into our DGP (investment bond) on into an international DGP (international investment bond);
– within the DGP, investment is then gifted into a discounted gift trust, which may be the absolute discounted gift trust or the discretionary discounted gift trust;
– provided sufficient funds are available, the Settlor(s) Retains an absolute right to regular cash payments of a fixed amount on fixed dates until their death. This retained benefit/interest has a value to the Settlor during their lifetime but none on their death; this is what creates the discounted gift for IHT purposes and is fully explained in the next subsection;
- Residual fund will be available to be used for the benefit of the beneficiaries of the trust (as chosen by the Settlor). The discounted gift element of the investment will fall outside the settlors estate If the survey for seven years from the date of the gift, and easy:
– chargeable lifetime transfer if the DGP is used with a discretionary discounted gift trust and a potentially exempt transfer if the DGP is used with an absolute discounted gift trust.
Discounted gift plan – ongoing IHT
When do periodic charges Apply to the DGP
The DGT when placed in a discretionary discounted gift trust may be subject to credit charges on every 10th anniversary of the establishment of the plan and exit charges and all distributions from the trust excluding the income paid to the Settlor.
The maximum video to charge is 6% on any XS over the available no refund. Yes it charge is a proportion of the previous Pediotic charge and can therefore never been more than 6% and is usually much less. If there is no IHT liability on the establishment of the trust there will be no exit charges in the first 10 years of the DGP. On any 10th anniversary when there is no periodic charge there will be no exit charges for the next 10 years. The settlors income stream is never subject to any exit charges.
