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Discounted gift trusts

A Discounted gift trust (DGT) is comprised a gift into settlement with certain 'rights' being retained. The retained rights may, for instance, be a series of single premium policies maturing (usually) on successive anniversaries of the initial investment or on survival, reverting to the settlor, if they are alive on the maturity date, or the settlor carves out the right to receive future capital payments if they are alive at each prospective payment date. The gift with reservation provisions do not apply to DGTs.

In the straightforward case where the settlor has retained a right to an annual income or to a reversion under arrangements, HMRC confirms that the right is not property within FA 2004, Sch 15, para 8 as the trustees hold it on bare trust for the settlor. A bare trust is not a settlement for inheritance tax purposes. The settlor is excluded from other benefits under the policy and so Sch