I’ve been asked to look at a Will where the testator wishes to leave 10% of his estate to charities in order to qualify for the reduced rate of IHT. The structure of this Will is his home (he is sole owner and the property is way over his nil rate band and RNRB – but not worth more than 2m) to a life interest trust for his wife to occupy then over to his children when the trust come to an end and residue to his children.
If wife survives him then there will no IHT as the spouse exemption will apply to the Trust and the residue is within the nil rate band. I am aware that the value of the trust will be aggregated to his wife estate on her death and IHT will be payable and it will therefore be apportioned pro rate between her free estate and the Trust.
The Will is drafted using practical law’s standard precedent leaving 10% of the property Trust to charity. I wonder whether in practice this will work and seek advice from the forum.
My concerns/thoughts are as follows:
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If there is no IHT payable on his estate if he dies before his wife then can this exemption be claimed on the wife’s death?
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Does the wife need a will leaving 10% of her estate to charity in order for the trust to qualify for the reduced rate, as HMRC will add the settled component to her estate and technically IHT is calculated on her estate.
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Is it enough just to leave 10% of the Trust fund on the wife’s death to charity in his will to qualify for the reduced rate?
Any thoughts and advice would be much appreciated.
Jensen Bourke
Bennett Oakley