Select Discounted Gift Trust (Select DGT) Summary


The Select DGT is a trust where the individual gifts a Capital Redemption or Life Assurance Policy into a trust for the ultimate benefit of the trust's nominated beneficiaries. The trust allows for both a Gifted and an Access Fund to be created. The Settlor carves out a right to capital sums which are payable to the Settlor for as long as the Settlor survives or until the trust fund is exhausted, if that should happen earlier.

The value of the amount gifted initially into the Gifted Fund is reduced for Inheritance Tax purposes should the Settlor die within seven years of creating the trust. This is because in the case of a gift made subject to retention of a contingent interest, the amount of the transfer equals the gift less the value of the retained interest.

Once the trust has been created it is not possible to amend the amounts of the capital sums payable to the Settlor. The creation of the Access Fund is optional and is essentially a ‘rainy day’ fund which provides the Settlor with access to capital should unforeseen circumstances arise. If in the future, the Settlor should decide he or she no longer requires access to this fund, it can be gifted to the trust to be held for the benefit of the nominated beneficiaries.

The Select DGT is trust based as opposed to product based which provides flexibility if the trustees should decide to change the underlying assets.

General Features of the Trust

  • It can be established with single or joint settlors.
  • The trust can accept increments.
  • The trust allows the Settlor the option of creating an Access Fund.
  • The trust will avoid Manx Probate assuming there is a remaining trustee alive at the time of the death of the last life assured on the policy.
  • Trust based rather than product based.


The Select DGT would be suitable for individuals who:

  • Are UK domiciled or deemed UK domiciled for Inheritance Tax purposes.
  • Are looking to reduce the value of their estate for Inheritance Tax purposes and are prepared to make a gift so long as their standard of living can be maintained.
  • Can afford to gift away any potential growth on their existing capital.
  • Are in good health.
  • Require an immediate reduction in Inheritance Tax.
  • Require access to pre-determined capital payments from the trust.
  • Are not confident about gifting away all of their disposable capital and would like the ability to retain access to some of it should unforeseen circumstances occur.


Establishing the trust as a Bare Trust would be suitable for individuals who:

  • Wish to create a discounted potentially exempt transfer for IHT purposes.
  • Wish to avoid reporting requirements to HMRC.
  • Have specific beneficiaries in mind.


Establishing the trust as a Flexible Trust would be suitable for individuals who:

  • Require flexibility regarding their choice of beneficiaries and would like to cater for as yet unborn family members.


Click here to view the Select Discounted Gift Trust Client Guide

Important Notes

Please note that every care has been taken to ensure that the information provided is correct and in accordance with our current understanding of the law and Her Majesty's Revenue and Customs (HMRC) practice as at March 2010. You should note however, that we cannot take on the role of an individual taxation adviser and independent confirmation should be obtained before acting or refraining from acting upon the information given. The law and HMRC practice are subject to change. Legislation varies from country to country and the policyholder's country of residence may impact on any of the above.