Residuary Life Interest with annual capital payment to a non-exempt beneficiary

(Lisa Jones) #1

We are dealing with an estate where the testator has given a life interest to his wife in the Residuary estate but with a condition that £2,500 per annum be paid from the underlying capital to his son who is a non-exempt beneficiary. On the death of the widow, the residuary estate becomes a life interest for the son and on his death , to a UK Registered charity. The difficulty is how to report to HMRC for Inheritance Tax, the element relevant to the son who is a non-exempt beneficiary. Typically a life interest of the Residuary Estate to a widow would be spouse exempt for inheritance tax purposes, however from the year of death , there is capital payments to the non-exempt beneficiary, ie the son from the same part of the estate to which the widow has a life interest. Do any of the forum members have a view on exactly how this should be reported for IHT to HMRC?

Lisa Jones