Appointment of Trust Assets within 2 years of death

Trusts Discussion
1

Hi Everyone

Just after a second opinion on a scenario I have come across recently.

A Will of the deceased left the residuary estate into an existing lifetime pilot trust. The pilot trust was set up several years prior to his death and held the standard £10.

The deceased died in March 2019 and a Deed of Appointment was done in February 2021 to essentially give the surviving spouse a life interest in all of the assets which were coming from the residuary estate into the trust.

Does this come within the realm of section 144 IHTA 1984? My understanding was that this legislation could only be used for discretionary trusts contained within Wills and if the appointment of assets occurred within the first two years of death. The dates on the above scenario make me think it was done with the intention of trying to obtain the tax advantages of s144…

2

To the extent that any of the trust fund was settled by the settlor’s will, s.144 will apply to that part of the trust fund.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

This type of operation is not mention in IHTM but 3581-4 are well worth reading. It is important that the pilot trust is not a QIIP trust as it might be if established pre-March 22 2006.

Jack Harper

4

Thanks Paul, this is helpful.

The appointment created a life interest over the assets, presumably to obtain spouse exemption for Inheritance Tax for the estate. Would this therefore be classed as an IPDI?

Thank you

5

Yes, that would normally be the case.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals