My client inherited his spouse’s estate and set up a lifetime discretionary trust with £X for the benefit of his grandchildren. There was no deed of variation and the death is now more than two years ago. A deed of gift was executed to
transfer the funds into trust. The actual transfer did not take place immediately and the funds were in fact paid into the trust bank account over several instalments some 2/3 years later. In the meantime, the funds remained in the Executor’s account (he was
not an executor).
Is the date of the CLT the date that the deed was executed or can it be argued that the gift was not perfected until the funds were actually transferred (which is preferable)? If the latter is possible, but my client’s mental capacity was
questionable prior to the final transfers, he cannot sign the IHT100. Can the trustees sign?
I would expect HMRC normally to look to the date that the individual
cheques cleared the executors’ account as being the effective date that
part of the gift was made. Until then, the donor could rescind their
instructions.
However, the situation may be complicated if the donor had lost capacity
to make gifts before the final instalment was paid. If capacity was
lost, then the “promise” to pay over the remaining monies will have
lapsed, unless the donor had done everything in his power to make the
payments (which may be unlikely).
If the executors made any payments under a lapsed authority (i.e. whilst
the donor was without capacity) they would be void, rather than
voidable. An application to the Court of Protection would then be
required if they were to be made again.
It may depend on the wording of the trust document and any associated deeds of gift. If those documents were deeds and refer to specific amounts, they may have created a binding promise to pay, which was then simply fulfilled at a later date.
This would be similar to a deed of variation (which is in reality simply a deed of gift), which is typically fulfilled by the transfer of cash or assets at a later stage. The “gift” is still binding with effect from the deed being signed.
If the trust document does not specify the amount to be settled and there are no deeds of gift, then I agree with others that the gift into trust would not take effect until later, e.g. when the cheques were cashed, and I gather there may then be issues of validity and capacity.