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Standard Life urges IFAs to underwrite discount gift trusts

Standard Life is recommending that discounted gift trusts should be underwritten to prevent problems for the relatives of clients if they die early.

The inheritance tax planning tool enables clients to invest money in a trust while taking an income.

If the client dies within seven years, the discount – the cost of the income stream – is removed from the estate, reducing the overall IHT bill.

National development specialist for estate planning Julie Hutchison warns that if clients do not underwrite the income stream – which provides them with a discount certificate – then their dependants will have to provide all their health information to Revenue and Customs if they die within seven years because the income rate is based on actuarial rates of life expectancy.

Standard is offering underwriting at no extra cost and has set up a support team of four paralegals to help in any legal difficulties.

Hutchison says: “Underwriting is not compulsory but it is sensible. It gives some level of certainty about the income levels. If it is not underwritten, then there is no valuation exercise. The risk is that if you die within seven years, the exe- cutors will be left having to debate this with the Revenue and will have to go to the GP to get medical records, which can be upsetting.”

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