Life Interest Trust: shares passed from wife to son (IHT aspects)

Dear All,

I have tried to find the answer on the forum, but it was a bit impossible. And I apologise for repeating the questions, if it was before.

I am currently reviewing the position of the Life Interest Trust, which was created by Will on the death in 1983. The deceased husband passed the shares (5,000 shares in total) to his wife under s.49 IHTA.

In 2015 the trustees made a decision to transfer within the trust 4,000 shares to the wife’s son. The shares value was below NRB.

As I understand, according to the changes brought after 22 March 2006, the transfer of 4,000 shares from the wife to son will be considered as a relevant property for periodic charges and exit charges and will be liable to CLT (if over NRB) from the beneficiary of the asset that has been taken away.

In this case the periodic charges will be reported to HMRC on the date of transfer (deed signed) of the shares to the son.

The rest of the shares (1,000 of wife’s) are still falling under the s.49 IHTA and will be a part of the wife’s Estate on the date of death.

The trust is not needed to be registered (with Trust Registration Service) as the income is still mandated directly to wife and son.

I would appreciate if you would confirm that my above understandings are correct.

Thank you,

Andrei Baliuk

Very nearly Andrei.

Yes you are right that the 4,000 shares are now relevant property and treated as in a settlement created by the widow (IHTA s80)

But the 10 year anniversary date, governing the timing of periodic and exit charges is the date of the husband’s death (IHTA s61(2)).

Anthony Nixon
Irwin Mitchell Private Wealth

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Thank you very much, Anthony. That really helps!

Andrei Baliuk