IHT400 and Lifetime Settlement


We have an estate where H & W settled their home in trust during their lifetime as joint tenants. They reserved a right to income.

H has now died and IHT400 is being completed.

The gift into trust is an obvious reservation of benefit and therefore must be included in the IHT400 as such (H’s half share valued at date of death).

The question is - does the half share of the property gifted into trust also have to be included? We have sought advice and have been told it should be included twice however we have nothing to base this upon (reference). To be taxed twice would seem to be inequitable and we need to be sure of our facts.

Residue of estate passes to spouse.

Any input greatly appreciated as clients are obviously concerned!

Many thanks

Kathy Melkerts
Melkerts Solicitors


I believe this has since been answered on another thread but all comments still welcome!

Many thanks

Kathy Melkerts

(Paul Desmond Doherty) #3

The question is - does the half share of the property gifted into trust also have to be included?

The answer is no. Section 80 of the 1984 Act confirms that there is no IHT charge on first death, only on the second. death when property is disposed of, by way of trust.

Des Doherty

(Nigel Scase) #4

In the original posting it is not given when the life interests were put in place ie before or after 22 March 2006.

If they were put in place before then I don’t see there being a gift with reservation issue as there would not have been a transfer of value when the settlements were made (no diminution in the taxpayers estates because of the aggregation of the life interests)

If they were put in place after 22 march 2006 then the gift into the trusts would be a CLT and the life interests would not aggregate so the GROB provisions apply. On death it would be looked at like any other GROB ie which result gives the larger tax liability; deeming the assets still to be owned or including the gift (if it was within 7 years of the death)

As to s80 I may be missing the point but I don’t see how this affects it as s80 only applied to that chapter of the IHT legislation dealing with 10yr and exit charges and not the act as a whole.

Nigel Scase
Greene & Greene

(jonzigmond) #5

When was the property transferred into the trust? This will determine if there was a qualifying interest in possession.

If the transfer into trust was before 22 March 2006 the share of the house will be treated as being in the estate and it being also a gift with reservation would appear to have no practical effect. If on or after 22 March 2006 then the gift with reservation provisions deem it to be within the estate.

Section 80 is relevant only to the charges on trustees holding relevant property.

Jon Zigmond