Reduce IHT Liability with a Discounted Gift & Income Plan

Clerical Medical is launching a new investment guide for advisers to help their clients reduce their inheritance tax (IHT) liability with a Discounted Gift & Income Plan (DGIP).

Estate planning is becoming an increasing priority. Research shows there are 2.3 million occupied properties in the UK worth more than the 2007/08 IHT threshold of £300,000 – about 12% of all owner occupied properties. With house prices increasing at a faster rate than the IHT threshold, more and more people are finding themselves with an IHT problem.

The estate planning market was rocked in 2006 when Gordon Brown announced changes which radically altered the way in which trusts could be used in estate planning. Operating in this market now requires high levels of technical competence.

Clerical Medical designed a guide to help advisers through some of the complex advice considerations they need to be aware of. The guide briefly introduces a simple estate planning strategy and then focuses on the Discounted Gift & Income Plan (DGIP).

What is a Discounted Gift and Income Plan?

A DGIP uses a trust to allow a client (the settlor) to make a gift of funds to a trust that they've created for family members or friends to benefit from whilst retaining a right to an income. Income is paid until the settlor dies or the fund has been exhausted, whichever happens first. A DGIP may be appropriate for clients who don't need access to capital, but do require a fixed income each year.

"We are focusing on the Discounted Gift & Income Plan as we believe it provides an effective solution to the IHT problems that many of clients may face," said Nick Williams, chartered tax adviser at Clerical Medical.