Trusts and same day additions

(Lisa Davies) #1

I would welcome the views of the forum regarding the application of the same day addition rules.

My understanding is that if the same settlor makes additions to two or more settlements on the same day (e.g. directed payments within their will, made on DOD), effectively both of the settlements will be treated like settlements that are related to each other for IHT purposes - so when it comes to calculating periodic IHT charges etc. I am preparing wills for a couple who each set up a Discretionary Trust in 2012 to benefit disabled relatives. They now wish to leave their estates partly between the existing trusts and with the remainder to a number of charities. They have asked me to include discretionary trusts in their wills in order to achieve this. The LOW would then assign monies to the charities or the existing trusts accordingly. The original trusts contain £100K each and the LOW would direct a further £400K to each of them. IHT within the trusts themselves is therefore an issue, whether or not the SDA rules would apply.

If they set up another pilot trust now, could they appoint some of the money (say £200K) into the 2012 trusts on death, and then appoint the remaining £200K that they want to give into the new pilot trusts after 2 years? This would avoid reading back and should circumvent the SDA rules, or am I overlooking something crucial?

Lisa Davies