If a will includes a flexible life interest for spouse with an overriding power of appointment creating discretionary trusts , a relevant property trust arises on the death of the spouse life tenant. When calculating the IHT exit charge
on the distribution after the spouse`s death is it worked out from the death of the life tenant in which case the charge will be low or from the death of the original Testator.
Is it better as a general rule to provide in wills that the discretion can only be exercised during the lifetime of the surviving spouse so that there are only absolute interests and no exit charges on appointment after her death? . The
problem then is that if the power is not exercised during the spouses lifetime (possibly because she dies shortly after the Testator) then the default provisions will apply which may run counter to the original Testators intention to allow there to be decisions
taken by the Trustees depending on the circumstances at the time.
Finula Allen
finula.allen@kendallanddavies.co.uk
