The mechanics of getting the estate reduction without giving up income
Why it matters
A Discounted Gift Trust lets you place a capital lump sum into a trust for your chosen beneficiaries while retaining the right to a fixed income for life. A portion of the gift — the 'discount' — is treated as leaving your estate for IHT immediately. The remainder falls outside the estate after seven years.
The income entitlement is set at outset and cannot be varied.
How it works
The capital is invested inside the trust — typically into an investment bond. The trustees pay the agreed income to you for as long as you live. On death, the residual capital passes to the named beneficiaries free of any further IHT (once the seven years are up, or immediately for the discounted portion).
Who it suits
People in their 60s or 70s with surplus capital they can commit permanently, income needs that are stable and predictable, and a clear view of who should ultimately inherit. Not suitable where flexibility over capital access matters.
What's involved
This is regulated investment and trust advice. The introduction goes to an independently FCA-regulated adviser who sets up the trust, arranges the underlying investment, and manages the ongoing reviews.