I have a very unusually drafted inter vivos RPT trust, created in 2012. It is Settlor interested and creates a life interest for the Settlor, then to Settlor’s father (now deceased) for life, then to Settlor’s daughter for life and finally to the grandchildren absolutely on the death of the daughter. My client had created the trust with the intention of IHT planning and is devastated that it remains within her estate. She is prepared to now give up the income but has until now, been receiving it. We have flexible powers and can appoint the capital of the Trust Fund to the Settlor under the trust deed.
As far as I can see, we have 2 options:
- My client surrenders her interest, thereby advancing her daughter’s life interest. The RPT remains and there is no disposal for CGT or IHT. This would amount to a release of benefit by my client and she would need to survive 7 years, although as she is 87, insurance will also be taken out; or
- We appoint the assets back to her and she then re-settles the asset into a new trust whereby she is excluded as a beneficiary. This would be a disposal for CGT purposes but the value is below the NRB so no IHT would arise. Again, we will take out insurance to cover the 7 years.
Hoping I’m on the right lines