For a definition of a Gift With Reservation on discretionary
trusts and details of tracing settled assets, see the lifetime
transfers section of this manual, from
In the simplest terms, if a settlor transfers property to a discretionary trust of which they are a member of a class of potential beneficiaries, the settlor has reserved a benefit. This applies despite the argument that (in the nature of a discretionary trust) the trustees might never give the settlor any benefit.
The reservation of benefit will then have one of two effects
Whether there is a GWR claim or not, the normal discretionary trust cycle of charges is unaffected. Ten year anniversary (TYA) and proportionate charges apply without any disturbance.
However, any inheritance tax due from the trust because of death or a failed PET will be a liability of the trustees.