Discounted Gift Trusts
Our advice is to avoid using Discounted Gift Trusts (DGTs). They seem attractive. You get your Inheritance Tax exemption immediately. You don't have to wait 7 years or even 2 years. And you get a monthly income.
If you put £100,000 into a DGT you don't save 40% IHT on the £100,000. You receive a discount based on many factors mainly around your age and health. The discount could be 30% but is often less and sometimes nil. Even with a discount of 30%, you only save 40% tax on the 30% discount i.e. £12,000 IHTY on an investment of £100,000 not £40,000 as many people seem to think. And the "income" is actually repayment of capital. This is normally at 5% so if you put in £100,000 you would have to receive £5,000 per annum back. That usually just builds up year on year and will itself be subject to 40% IHT when you die. So you might put in £100,000, get a 30% discount and therefore save £12,000 IHT. However after 4 years you have £20,000 back which itself will result in £8,000 IHT. So the net saving is only £14,000. And if you live longer it can go negative.
Instead, why don't you speak to us. We have many better solutions.