Quilter 13 Death within seven years If Mrs Roberts dies within seven years of making the gift: The discounted gift of £28,681 will become chargeable to IHT at 40% as this is a potentially exempt transfer. It may be possible to reduce this if at least three years have passed, due to taper relief (see page 17). Withdrawals to pay Mrs Roberts cease and the entire value of the trust fund can be distributed to Sally and Jill. The growth on the bond will not be subject to IHT. Mrs Roberts’ executors may need to negotiate with HMRC to determine the actual discount to be applied to the trust fund. If HMRC agrees with our calculations, then in Mrs Roberts’ case the full discount of £71,319 will be free from IHT. If Mrs Roberts had not applied for a discounted gift trust to reduce her IHT liability, her tax bill could have been £40,000 (40% tax on the investment of £100,000). By planning ahead, even if she dies within the first seven years, Mrs Roberts, subject to HMRC’s agreement on the discount amount, will have reduced her beneficiaries’ IHT bill from £40,000 to £11,472 and saved them £28,528 (40% tax on the discount of £71,319). There may be a further IHT saving as a result of taper relief on the discounted gift of £28,681. In addition, any growth on this investment will also be free from IHT. Death after seven years If Mrs Roberts dies more than seven years after making the gift: The discounted gift of £28,681, although originally a potentially exempt transfer, will now be completely free from IHT. Withdrawals to pay Mrs Roberts cease and the entire value of the trust fund can be distributed to Sally and Jill. Through proactive planning, and assuming Mrs Roberts lives for at least a further seven years, she will have saved her beneficiaries £40,000 (40% tax on the investment of £100,000). In addition, any growth on this investment will also be free from IHT. Through proactive planning, and assuming Mrs Roberts lives for at least a further seven years, she will have saved her beneficiaries £40,000...