On 21 Dec, 2004, Kathleen Watkins, then aged 89 years and nine months, was advised to invest her money in a DGT for the benefit of her sons, David and Keith Watkins.
A little over a year later, Kathleen Watkins died, aged 91. The trust, which it had been anticipated would be a potentially exempt transfer, became chargeable.
The latest ruling was made after an appeal by the two sons over an earlier court case, which found that HM Revenue & Customs was right to charge IHT on the assets held in the trust.
The main reason the trust was eligible for IHT was because the court decided that it could not be proven, and was therefore unlikely, that a life policy against Kathleen Watkins would be attainable on the open market, as is required for the trust to work.
A spokesperson for Skandia International said the company was not involved in the sale of the product as it does not pro¬vide advice to clients.
Rachael Griffin, head of product law at Skandia said: “DGTs can play an important role in a well considered IHT planning strategy. The actual discount applied is a matter to be agreed by HMRC and the executors of the estate in question.”
“The illustrations that we provide are based on HMRC agreed principles so will be a good guide. Even if no discount is agreed by HMRC, DGTs still offer value in terms of ensuring future investment growth is outside of the estate for IHT purposes, and that the potentially exempt transfer rules are utilised. Financial advisers are well placed to determine whether a DGT is an appropriate product for someone’s individual needs,” Griffin added.
