My clients’ parents’ Will were drawn up in 2005 with the usual nil rate band discretionary trust, as was common then.
Mother passed away first and the father passed away 9 months later.
They both had mirror wills.
Mother’s will - The discretionary beneficiaries are her Husband and her two adult children. These three are also the will executors and trustees.
The residue goes to the surviving spouse and their 2 adult children.
Her estate is worth below £325,000.
Father’s will - same as above.
If the mother’s estate is Appointed out to the 2 children, then the father’s estate will be worth less than £325,000.
Questions:
on her death, can the surviving 2 Executors/Trustees now execute a Deed of Appointment within two years of her death so as to appoint the NRBD assets to her 2 children?
on his death, can the 2 Executors/Trustees (ie the 2 children) execute a Deed of Appointment (within two years of death) so as to appoint the NRBD assets to his 2 children?
In short, the Nil rate Band Trust is not required and what is desired at each stage that the will assets go directly to the 2 children.
Point 1. The father has passed away. Can the children who are both the executors now execute a Deed of appointment on the NRBD on their mothers will even if their father has passed away
If the STEP Standard Provisions (First Edition) are incorporated into the mother’s will, the children cannot validly appoint to themselves unless there is also an Independent Trustee (clause 9).
If the STEP Standard Provisions are not incorporated, and there is nothing in the mother’s will indicating otherwise then, as trustees originally appointed they can exercise the power of appointment to benefit themselves.
The situation will be similar in respect of the father’s will
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
No, the trustees will not be able to make an appointment in favour of the now-deceased father (unless the class of discretionary beneficiaries specifically includes the father’s estate, as opposed to the father, which would be very unusual).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I’m assuming that even if the Deed of Appointment is read back under s144, the trustees cannot make an appointment in favour of father at a time when he is no longer alive, as s144 is a deeming provision only.
If the Will allows any two beneficiaries to nominate to the trustees a potential new beneficiary, would they be able to nominate ‘father’s estate’ as a beneficiary, and thereafter the trustees can make an appointment to father’s estate. Would this still attract spouse exemption?
Sorry if the estates are under the NRB why is this an issue?
Mum died first had nrbdt and below NRB and children can appoint to themselves(bearing in mind they may need to appoint an independent trustee first depending on the wording)
Dad has his own NRB £325k less any gifts brought into account plus unused share of wife’s NRB (she couldn’t use it in full) plus rnrb x2 if property he lived in worth more than £350k
If still over this allowance £ 675k + tnrb then tax to pay
If the Will allows any two beneficiaries to nominate to the trustees a potential new beneficiary, would they be able to nominate ‘father’s estate’ as a beneficiary, and thereafter the trustees can make an appointment to father’s estate. Would this still attract spouse exemption?
Hi Sarah, I don’t think this is possible - see IHTM35183. The clause in the Will also probably allows any ‘person’ to be added as a beneficiary, but not an estate.
It may be possible to appoint the estate to an adult beneficiary (s144) who then varies this in favour of the deceased spouse (s142).
Whilst HMRC seems to encourage the use of s.144 IHTA 1984 followed by a variation effective under s.142, those adopting this procedure need to be satisfied that the exercise of the power of appointment to which s.144 is intended to apply is not a fraud on a power. S.144 should only apply when the relevant powers are validly exercised and the HMRC guidance should be read with that in mind.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals