Mr & Mrs A had one adult son B, who had two adult daughters C & D.
In 2004 Mr & Mrs A transfer their home to a Settlement and they are defined as the first and second life tenants. The Settlement says that income from the trust assets is to be paid as to 50% for the first life tenant (clause 3.1.1) and 50% to the second life tenant (clause 3.1.2) with power to advance capital to them whilst disregarding all other interests.
The Settlement then provides that, after the application of the provisions of sub-clause 3.1 (which contains the individual rights to income as above) “and any application of the powers conferred by clause 3.2 (the power to appoint capital to the life tenants) “the capital and income of the Trust Fund shall be held on trust for B”. [Note the collective phrasing of after the application of clause 3.1 as opposed to after the application of each of sub-clauses 3.1.1 and 3.1.2.]
The Settlement also provides in clause 5 that the Trustees have the power to appoint the whole or any part of the Trust Fund in which “B is then entitled to an interest in possession” to or for the benefit of such of the Discretionary Beneficiaries as they in their absolute discretion think fit. The Discretionary Beneficiaries include Mr & Mrs A, B, C and D. “Interest in possession” has the meaning it has for the purposes of s. 71 of the IHTA 1984.
In 2017, when it was known that B was terminally ill, C & D were appointed as additional trustees of the Settlement. However no appointments of capital have been made since 2004 by Deed, Will or Codicil. The Settlement provides that any appointment must be made by Deed, executed during the Trust Period (max 80 years from the date of the Deed), or by Will or Codicil during the Trust Period.
Mrs A died later in 2004 and left her estate to Mr A. B died in 2018 and so was survived by Mr A. Mr A died in 2020 and was survived by C & D.
Questions:
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On the death of Mrs A in 2004, did B acquire an interest in possession in 50% of the trust assets or did Mr A become entitled to the life interest in the whole of the trust assets (by virtue of the collective wording “after the application of the provisions of clause 3.1”)?
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Now that Mr A has died, can anything be done now, given that B predeceased him to appoint the trust property in which Mr A had a life interest to C & D so that it does not fall to be included within B’s estate?