Relevant Property Trusts and Estate Duty settlements.


(Simon James Northcott) #1

A settlement made in the 1960s in the days of Estate Duty, converted to an Accumulation and Maintenance trust in 1979 under which the children received an interest in possession, subject to overriding powers of appointment, prior to March 2006. A child has
died, and had a qualifying interest in possession. The overriding powers of appointment applied to the absolute remainder trusts to the grandchildren after the death of the child, who died in 2016.

  1. I believe this means the shares of the grandchildren remain in trust, which is now a relevant property trust, as a result of the power of appointment, until that power is released. Do members agree?

  2. On release of the power there will be a proportionate exit charge, which I assume will require recalculating the value at the last ten year charge date (when the trust was not relevant property) at the value of the assets in 2016, with relief for the period
    the assets were not relevant property. This will give the basis for the proportionate charge. Do members agree?

  3. When calculating the ten year charge, account has to be taken of the original settlor’s cumulative total-How is this calculated when the trusts were set up in Estate Duty days, when I believe the survivorship period for lifetime gifts was 10 years, and I do
    not think any tax was paid on lifetime gifts unless you died within the 10 year period?

Simon Northcott


(Paul) #2

I agree with what you have said in ‘1’ and ‘2’. So far as ‘3’ is concerned, there is no cumulative total in this case, because transfers of value made by the settlor on or before 27 March 1974 are disregarded (s 66(5)(a) IHTA).

Paul Davies
Clarke Willmott