Quilter 7 Once this has been set up, it is transferred into the discounted gift trust and legal ownership moves to the trustees. The investment then forms the trust fund. You will no longer have any access to the investment other than the right to receive the regular withdrawals from it. Details of the withdrawal options are shown on page 12. Based upon factors such as your age, health (see page 10) and the level of withdrawals requested, we will calculate the estimated value of your right to receive the withdrawals. This value is known as ‘the discount’. This is the amount that will fall immediately outside your estate on your death, and is therefore not liable for IHT, even if you were to die within the first seven years. Whilst we use our experience and understanding of current legislation to assess the discount, the actual discount that applies will only be determined by HM Revenue & Customs after your death. The value of your investment, less the discount, is what is referred to as the ‘discounted gift’. For IHT purposes, this is a chargeable lifetime transfer (CLT). The CLT, if it exceeds your available nil-rate band, is subject to IHT at 20% on the excess at outset, and after seven years the CLT will fall outside your estate for IHT purposes. Should you die within seven years, additional tax of up to 20% may be payable. The trust fund may also be subject to periodic and exit charges (see page 15 for more details). How a discretionary version of a discounted gift trust works To set up a discounted gift trust using a bond, you will first need to invest a cash sum in your bond (see page 9 for more details). Nil-rate band The nil-rate band is not fixed and has, historically, increased year-on-year. Currently the first £325,000 (frozen until the 2026/2027 tax year) in an individual’s estate is taxed at 0% for IHT purposes. This is known as the nil-rate band. Any assets above the nil-rate band may be liable to IHT at 40%.