We are advising a client whose late husband left his estate on a discretionary trust, intending for his child to be the main beneficiary. However, the executors would like to utilise the spouse exemption and the trustees plan to appoint a share of the estate to the surviving spouse. The spouse has already informed us that she intends to gift the assets back to the child. We are concerned that HMRC would consider this to be an associated operation under section 268 IHTA and therefore argue that the spouse exemption is not available.
Is there a way around this, for example by waiting a period of time before gifting the assets to the child, or will it always be an associated operation as it was the intention of the spouse from the outset?