WOL policy in discretionary trust to use annual IHT exemptions

Hi all,

We are potentially looking to recommend our clients use both of their £3,000 gifting allowances (£6,000 total) to set up a fixed premium guaranteed whole of life policy, second death, written under discretionary trust.

However, I just want to be straight on the IHT logistics of this, as the information around is not overly clear.

1) Am I right in thinking that the gifting allowance is chronological over a tax year and not purpose specific? e.g. If you made a £3,000 gift on the 6th April, followed by a £3,000 gift to someone else on the 31st September, the April gift will always use the allowance first and then the September gift will become the PET?
2) With the above in mind, should the policy be set up as an annual premium of £6,000 as close to the start of the tax year or does it not matter and so a monthly of £500 could be arranged?
3) If the once the policy has been set up, the client were to gift more money away (e.g. as a £10,000 PET), then would the monthly premium have the risk of becoming a list of £500 CLTs after the PET every time until the end of the tax year?

Hope the above makes sense, but if anyone can shed any light on the most practical way to approach this kind of advice, that would be appreciated




  • Hi


    1) Yes
    2) & 3)

    Paying a single £3,000 at start of tax year would mean that transfer of value got all the exemption. If it was regular then as you say if you had made 2 x £500 then a big gift, the big gift would be £2,000 exempt, the rest a PET/CLT and the rest of the premiums would be CLTs.

    Normal expenditure out of income on the table though? makes it all go away (but extra record keeping).

  • That's what I thought - normal expenditure would work for now.

    I think we will go for an annual premium, as at least the admin for the client would be much simpler if they happened to gift before the premium date in the tax year and would give some added flexibility (especially if we effect the policy soonish)

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