The Scottish Life International discounted gift plan is designed for individuals who wish to make inheritance tax-effective gifts of capital, but need a substitute for the income previously generated from that capital. In return for the investment, the investor receives a pre-planned stream of payments for life.
The individual who establishes the Scottish Life International discounted gift plan is the settlor and they can set up the trust with either cash or an existing Scottish Life International bond. The terms of the trust are such that on dates specified in advance by the settlor, payment of a specified amount is made by the trustees to the settlor.
The plan is structured so that the ‘notorious’ inheritance tax ‘gift with reservation’ provisions do not apply.
Scottish Life International’s head of UK sales Alan Blackburne says: “The Scottish Life International discounted gift plan is a valuable tool for IFAs who wish to develop inheritance tax planning strategies with clients. Although transfers to the trust trigger an inheritance tax chargeable lifetime transfer, the value of the transfer is not the amount invested but a discounted amount reflecting the value of the future stream of payments from the trustees to the investor. The basis on which the discount is calculated has been agreed with HM Revenue & Customs – a fact which should give confidence to users of the plan.”