GWROB and excluded property

Trusts Discussion
1

GIFT OF CASH

A non domiciled person gives £300,000 to his daughter from cash held abroad will be a gift of excluded property and not chargeable to IHT on the donor’s death within
7 years. What if the donor comes to England for medical treatment and dies here still non-domiciled and £150,000 of the money is used by the daughter to pay for his treatment. The cash gift was made 10 months before his death while the donor was suffering
from cancer, but had no intention of coming to England. He only had to do so 7 months after the gift as he could not get the later treatment he needed abroad. Is this a GWROB in the whole £300,000, and will this apply notwithstanding it was originally a gift
of excluded property?

GIFT OF REVERSIONARY INTEREST

Donor assigns a vested reversionary interest in an IPDI trust (trust 1) to a discretionary trust (trust 2) of which he is one of the beneficiaries.

If the donor dies before the life tenant, there would be no chargeable GWROB as the reversionary interest in trust 2 is excluded property.

On the death of the life tenant in Trust 1 the assets in trust 2 cease to be excluded property, and so presumably on the later death of the donor he will have a GWROB.

If the donor was not treated as the settlor of trust 2 for iht then there would be no GWROB, but as section 81 IHTA only applies to property moving between relevant
property trusts, I believe the donor will be treated as the settlor of trust 2, and the GWROB will apply on his death after the life tenant.

I should be grateful for members’ thoughts on the above.

Simon Northcott

2

Regarding the cash gift I’m not sure how there can be any GROB at the donor’s date of death.

There are no tracing rules for cash gifts. At the date of the donor’s death the £150,000 was no longer in existence; it had disappeared ie it had been paid to the hospital.

The balancing £150,000 kept by the donee was not monies in which the donor had reserved any benefit (in the same way that a donor occupying the basement of a property which had been gifted would only give rise to a reservation in the basement not the whole property).

There may be income tax/CGT consequences due to a “remittance” by the donor of the £150,000.

Malcolm Finney