Gift Inter-Vivos and CLT

I am getting myself in a bit of a muddle, can you buy a gift inter-vivos policy for a Chargeable Lifetime Transfer i.e. a gift into a discretionary trust?

If so, I assume you just insure the potential liability, not the entire gift?


  •  :) Two very good articles. Thanks for sharing @Nathan ;
    Chartered Financial Planner FPFS MCSI APP
    Head of Technical at EQ Investors

  • In a word Nathan, yes. But like everything, it can get complicated.

    You need to be confident that you can calculate the potential liability and if there are PETs that predate the CLT it can be difficult to insure the correct amount (if it is possible at all) with a GIV plan.

    If you have a technical resource that you can use, I would definitely use it to check your proposed solution.
  • CaroCaro Member
    I may be barking up the wrong tree, but if the CLT is covered by the NRB, I don't think it will be a gift inter vivos that you need.

    If it is covered by the NRB and there have been no PETs in the seven years prior to the gift, there won't be IHT to pay on it if death occurs in the following seven years. It will be the executors of the estate who have more IHT to pay as a result of the gift using up the NRB.  

    The Trustees as recipients of the gift are ok as they won't have tax to pay unless there were PETs made in the seven years before the CLT that pushes it over the NRB. 

    Taper relief is given on the tax that is payable if death occurs in the seven years following a gift. If the gift is covered by the NRB, there will be no tax to pay and so no taper relief that requires gift inter vivos.

    If this gift is within the NRB, then it may be worth looking at a 7 year level term to cover the amount of NRB that is lost for the next seven years, which does not reduce. 

    I hope that makes sense?! Ben is right, it can be complicated!!  

  • You are right Caroline. The most important aspect is complete certainty of the gift history. If you know this then you can work out whether to use LTA or GIV cover or something else. 
  • RalfosRalfos Member
    Looking at something very similar today but with gifts far in excess of the NRB and sporadic over last few years. I can concur with Ben and Caro that it is indeed complicated but thanks for the steer both :o)
  • NathanNathan Member
    Thanks for all of your comments, this is in relation three gifts, 1 we have used a Deed of Variation to divert the assets directly to a trust for one of the Grandchildren,  the other is a gift from the recipient of the estate to a trust for another grandchild and the third is a gift from the recipient of the estate to her Husband, so no tapering to worry about and he then he makes a gift to the third grandchild in trust.

    The reason we have done it this way is that we wanted the recipient of the estate and her husband to remain beneficiaries of the gifts should they need long term care, so they can both be beneficiaries of the trust set up via DOV and the husband and wife can then both benefit from one anothers trusts...

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