Nil Rate Band Discretionary Trust Wills

Scenario

Couple made nil rate band discretionary trusts in 2006.

Wife died December 2014.
Family did not do anything to wife’s estate – left un-administered.
Wife’s estate comprised almost exclusively of her half share in the property (as TIC with husband) valued at around £800,000.

Husband sold property in February 2016 for £875,000.
Another family member was appointed to get over the restriction on the title.

All the sale proceeds were sent to husband’s bank account.
Husband dies in 2018 – leaving well over £500,000 in his bank account – the rest having been spent on care home fees.

Q1. Should any of the money in the bank be treated as being owned by the wife’s trustee’s? If so, how much, ie just a straight £325,000?

Q2. Should the husband’s estate report the total value held in the bank account and claim the transferable nil rate band?

Any advice gratefully received.

Kind regards

Gill Collins
WARWICK & BARKER

Who were the executors of the Will?
And who were the trustees of the trust?

Paul Davidoff
New Quadrant Partners Ltd

My starting point when considering cases of this nature is to look at the terms of the will. Sometimes there is a power for the trustees to pay or transfer capital to a beneficiary, which can be exercised informally (i.e. without a deed). In that case you might well interpret what has happened as being an informal exercise of that power, within two years of the wife’s death, which would be ‘read back’ into the will (so the transferable nil rate band would be available).

If capital can only be distributed pursuant to an appointment by deed then I think that the starting point is that the nil rate band trust is due the sum of £325,000 (plus interest) from the proceeds of sale and the transferable nil rate band is not due.

Paul Davies
Clarke Willmott LLP

In both wills the Partners in our firm were appointed as the Executors and Trustees of the Will. However, we were not notified of wife’s death at the time.

The solicitors that dealt with the sale of the property simply asked for a death certificate for wife and then husband appointed another family member as the
additional trustee.

This only came to light when husband died.

Gill Collins
Warwick & Barker

Thank you. Looking at the Will, the appointment has to be made by deed.

Therefore £325k plus interest held in husband’s account could be treated as a debt of the estate in that case – for the purposes of completing the IHT forms?

Gill Collins
Warwick & Barker