Save Inheritance Tax By Halving Your Estate Value Instantly
Published / Last Updated on 19/12/2023
What if?
- We could show you a way where your investment fund values remain the same, they do not fall in value, yet the value included in your estate for inheritance taxes is discounted immediately by say 50%, would you be interested?
- We could show you a way where you still receive the same income or growth from your investments yet the value included in your estate for inheritance taxes is discounted immediately by say 50%, would you be interested?
- We could show you a way where you cut your inheritance tax liability immediately on all your investments by say 50%, but you still get to keep the full income/growth from your investments, would you be interested?
Of course you would be interested. Why wouldn’t you be?
The solution has been around for many years, is approved by HMRC and is called a Discounted Gift Trust (DGT).
What is a Discounted Gift Trust?
- It is not as complex as it sounds.
- It is a lump sum investment with an insurance investment group (most big names offer DGTs).
- Your investment is gifted inside a simple trust e.g., for your children.
- You continue to get an income/growth from your investment. HMRC will accept an assumed income for you of up to 5% pa.
- The investment company makes an assumption of your life expectancy e.g., 10 years.
- Using these assumptions, it is assumed you will withdraw in 10 years X 5% pa income from your investment i.e. 50% of the original investment.
- On day 1, your investment has its full value including all income/growth for your beneficiaries in trust for your loved ones but your interest is discounted by 50% as it is assumed you will live for 10 years and drawdown at least 50% of the investment.
- This means you still benefit from 5% pa income/growth for the rest of your life but on day 1 only half the original value is included in your estate on death. Any increases in value are deemed outside your estate.
- After 7 years, the whole value of the investment is outside your estate but you still have access to 5% income/gains for the rest of you life.
- When you die, you loved ones inherit the full 100% value of the investment not just 50% of the orginal value plus income/growth.
A discounted gift trust gives you access to 5% pa ‘income’ but immediately reduces the value by a % for inheritance tax estate calculation purposes but the whole 100% of investment value goes to loved ones in trust.
NB.: 50% discount is merely an example, if you have a shorter lfe expectancy, the discount may be 10%, 20%, 30% etc. If you have a longer life expectancy, the discounted value may be more than 50%.
Want some more IHT saving ideas? If we could show you a way where you keep access to all your wealth built up during your lifetime but protect all future growth from 40% inheritance tax, would you be interested?
See: IHT Loan Trust
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