S. 144 IHTA- "property...settled by his Will" and the joint owners discount

A dies leaving a life interest in residue to his wife B, but subject to a NRB discretionary trust of a cash sum equal to the NRB.

B dies 4 months later. One year on, part of the half share of the residence of A and B (held as tenants in common equally) is appropriated to the NRB trust to satisfy the legacy of cash.

Within 2 years of A’s death the NRB trustees appoint part of the NRB trust fund (comprising only a share of the house) to A’s son.

Does s144 apply to the appointment? What is appointed is a share of the house, not a share of a cash sum, and the share of the house is not “property comprised in A’s estate immediately before his death settled by his Will”, but it would seem logically that s144 should apply.

If s144 does apply, does this mean the joint owners discount applies to the share of the house owned by B on her death, and to A’s share of the house in the residue trust on B’s death, as part of the house is for IHT purposes treated as being owned by the son.

At the moment HMRC are resisting a claim for joint owners discount as they say B had a life interest in A’s share of the house, so it is aggregated with B’s share of the house for IHT purposes. Is this a way to try to obtain the discount?

Simon Northcott


There’s a lot of food for thought in that post. Here’s what I think, purely for the purposes of discussion.

In terms of the applicability of s144, my starting point is that IHT is primarily concerned about transfers of value rather than transfers of things (with some specific exceptions such as RNRB). Immediately before A’s death, the value of the NRB was comprised in his estate. A share of the house to that value was appropriated for the purpose of the will, so that property was settled by the will.

Even if we reject that argument, looking at the terms of s144 (1), it refers to an event amounting to an exit within two years of death, but it does not actually say that the subject matter of the exit has to be the same particular property which is settled. Therefore the other argument is that it was “the value” which was settled, and it was the particular property which exited within two years, but s144(1) is still satisfied. That is to be expected given that trustees may also routinely realise property and invest cash during their stewardship.

On the life interest point, I cannot agree that B had a life interest in the house prior to her death. She had a life interest, which was an interest in an estate, whose value would reflect the overall estate less the value of the NRB. Like any residuary beneficiary, she had no entitlement to, or rights in any particular assets comprised in the estate.

Dale Ross
Blackadders LLP