Gifts from surplus income and monthly Discounted Gift Trust receipts

lohr500

Yet another question on gifting from surplus income.

I am being told that regular monthly receipts to the settlor of a Discounted Gift Trust are considered as capital, not income. (in this specific case with an annual value equal to 5% of the original fund). A quick google search seems to suggest this is the case. The Gift Trust was set up in 2009.

In simple terms, if the settlor receives say £2300 per month from pension income and interest on cash savings, PLUS £700 per month from the Discounted Gift Trust, AND has annualised regular expenditure of £2000 per month, then they would only have £300 surplus income per month?

So the surplus income used for gifting needs to be net of any Discounted Gift Fund receipts?

I just want to be sure about this as it will limit my mother's ability to make gifts from surplus income.

Is my understanding correct? Many thanks as ever for any and all replies.

poseidon1

You are correct.

The distributions from a discounted gift trust invested in life company Investment bonds, are of a capital nature and cannot be considered income for the purposes of the gifts from surplus income exemption.

See point 7 below under the income heading -

https://techzone.aberdeenadviser.com/public/iht-est-plan/gifts-out-of-surplus-income

lohr500

@poseidon1

Thanks for confirming my understanding.