I have a case where property is owned as to 20% for surviving spouse on a qualifying IIP. The other 80% is owned by discretionary trust. Both trusts derive from deceased spouse’s variation of his will. He was the sole owner of the property when he died. Trustees of DT have never formally exercised powers to allow surviving spouse to occupy. Practically however, she has been occupying exclusively and paying all outgoings since his death in December 2013. Are HMRC likely to argue she has a qualifying iip in the 80% as well as the 20% and all of it form part of her estate for IHT?
Whilst it is unlikely that HMRC could successfully treat the Discretionary Trust as providing an IIP for the surviving spouse, it would be better that the Trustees provide a Resolution in writing for the trust’s records to the effect that the Trustees had indeed exercised their discretion throughout this period and enabled an allowable beneficiary to occupy the Trust Property. This is not contradicted by any other events. Albeit it could be argued that she had this right through the 20% ownership as IIP beneficiary of the second trust.
The Vincent case is completely different in its facts than the position stated in the initial query.
Here a beneficiary was clearly given a life interest in a Trust, with the deceased’s brother, Thom, having the right to occupy the deceased’s share of the property for life, Thom having held a further share of the property as tenant in common.
The tax payer argued that it had been the deceased’s intention to make an absolute gift of the deceased’s share to those that the court ruled as effectively “remaindermen” of the Trust established in the will.
FTT correctly ruled the share of the property to be in Thom’s estate for IHT upon his death.