Discretionry Trust & Charity

Trusts Discussion
1

We have quite an unusual case whereby the sole beneficiary of an offshore discretionary trust is charity. The settlor is UK resident and domiciled. We have little detail on the background.

The trustees wish to remove charity and replace it with family members with a view to making capital distributions

We are trying to ascertain the IHT treatment. Guidance would suggest that:-

  1. The removal of the charity would result in a Flat Rate Charge; and
  2. The value of the settlement would then be regarded as relevant property.

Any thoughts would be most welcome.

Andrew Magilton
TFO Tax LLP

2

The problem is in trying to establish whether a trust of the sort you describe properly meets the criteria to be a temporary charitable trust (rather than a relevant property trust), bearing in mind the trustees apparently have an unfettered ability to benefit other people if they choose. On balance however I am inclined to agree with your analysis.

Paul Davies
DWF LLP