An Administration query: The deceased’s Will contains the following wording in a clause titled “Interest in Property”:
"- I give all my interest in the property known as ABC together with the furniture carpets curtains and other articles of household use or ornament not otherwise specifically gifted by my will or any codicil (“the property”) to my Trustees upon trust to retain or sell it.
- My Trustees shall so far as they are legally able not effect a sale of the property without the written consent of MAC.
- So long as the property remains unsold my Trustees shall allow MAC to live there and I further direct that this right is subject to her not re-marrying or co-habiting.
- I give my Trustees power to pay out of any proceeds of sale of this property or any substituted property (purchased as a result of this sub-clause) to purchase a freehold or leasehold property which will be held for the benefit of MAC on the same trusts to which this clause refers.
- This trust will determine upon the re-marriage or co-habitation of MAC or upon death and the property or its proceeds of sale or the investments arising from it shall go in accordance with the provisions in the following sub-clause.
- I give the said property ABC together with the said furniture carpets curtains and other articles of household use or ornament or its proceeds of sale or the investments arising from it to my daughter AR and my son NKD which shall be held by them or the survivor of them in equal shares and if either shall fail to obtain a vested interest leaving issue who survive me and reach the age of 18 years then such issue shall take by substitution such failed share and if there shall be more than one of such issue they shall take in equal shares per stirpes but so that no one takes a share if their parent is alive and takes a share."
There is no clause in the Will incorporating the STEP provisions. The value of the half share of property left by this Will is approximately £120000. The total estate is around £200k. The deceased and MAC were not married.
This feels like a IPDI Life Interest Trust but it contains termination criteria which I would normally expect to see in a Right to Occupy clause. As a result I am unsure of the tax treatment of this trust. The current situation is that the beneficiary MAC has moved out of the property and is renting it out and is receiving all of the rental income. The termination criteria have not been met.
Would it be fair to assume that as the trustees do not appear to have an overriding power to revoke the right to occupy (if indeed that is what this is), that HMRC would treat this trust as an IIP and that the full value of the property will therefore fall into the estate of MAC upon her death. If the termination criteria are triggered in the future, what is the tax treatment of the property at that point? Do the beneficiaries AR & NKD then receive their 50% share of the property at an acquisition cost of 50% of the value at that time?
MJC Consulting (Herts) Ltd