I am dealing with an estate which includes a discounted gift trust, set up on joint life’s of deceased and spouse, over 7 years ago.
For other reasons I am required to complete an IHT400, do I just need to give the surrender value in the IHT404 and claim the spouse exemption or do I need to do the IHT418?
QS Rose & Rose
With a DGT (as distinct from a “Gift-and-Loan” trust), I would have said neither. With the DGTs I have come across (which involve life assurance policies or capital redemption bonds), the terms of the governing trust “carves-out” interests in the underlying policy/ies. Broadly, the settlor/s has no interest in the ongoing surrender value or death benefit of the policy and thus, given that more than 7 years have elapsed since set up, the value of the trust assets have no effect on their estate. There is no loan or GROB. The rights granted to the settlor/s under the trust are treated similarly to a life annuity.
Where the DGT is one that involves a stream of maturing single premium bonds (where the settlor/s retains a right to just those maturity values), if any of these have been “deferred” in advance of said maturity (because, for example, the settlor/s does not need the money), there is an argument that such foregoing by the settlor/s constitutes a PET at that time.
Storrie & Company