"Discretionary Gift Trust" good idea or not?

Answer 1

Lottie, its me again. Sounds as though you are looking for IHT mitigation so speak to an authorised adviser as I said re Discounted Gift Trust. However there are many reasons for and against any sort of trust according to circumstances. There are things you should consider first such as having your will written correctly. If you are married you should look at Nil Rate Band Planning through your Will which effectively uses both spouse's allowance of £285,000. You should look at gifting (£3000pa plus £250pa to any number of people) and gifting surplus income ie any income above and beyond what you need to live on - consider future needs also.
You can see that there is no one answer as everyone has different circumstances. Remember that you have to ensure you are looked after throughout your life and you shouldn't sacrifice your life for others. If they are that worried they could always take out a life policy on you to help pay any IHT when you die.
Do not consider this to be advice (I have to say that under FSA rules!) Any adviser has to complete a full fact find to give you explicite advice.
Good luck with what is a minefield and the most highly regulated industry in the UK.

Answer 2

Trusts are always a good idea if you can manage to set one up. A trust is basically a way around the estate tax for the ultra-wealthy by setting up a fund for a benefactor (often times a child). There's a reason why the ultra-rich kids have trust funds. Because their ultra-rich parents aren't dumb (or their accountants aren't) and they know all the tricks.

In a trust there's the beneficiary (who receives the funds in the trust) and the trustee (who manages the finances in the trust and allocates the funds to the beneficiary). Because of this, the trustee is either also a relative or paid for her services.

In a discretionary trust the trustee can make decisions about the allocation of the funds and investments. This means that she can give the beneficiary or allocate the investments how much she deems fit. So, this would be a good idea if the trustee is financially savvy and personally responsible to the beneficiary (i.e. the welfare of the beneficiary is linked to the welfare of the trustee). This would not be a good idea if you'd want to set up some automatic and set payment schedule to the beneficiary.

Edit: Doh! I don't know about a Discounted Gift Trust.