Discretionary Trust with two settlors

I am hoping you can help me gain some clarity on an issue I am having as follows:

H died in July 2015 leaving a NRB discretionary trust (‘H’s Trust’). Within two years of the date of H’s death, one half of H’s Trust was appointed out to the son. The Trustees are keen to use the remaining half for the benefit of the daughter.

W died on 22 April 2017 leaving her estate equally between son and daughter absolutely. Son will take his share.

Daughter is a relatively vulnerable lady (has capacity but is terrified of handling large sums of money and would be easily parted from it should anyone of an unscrupulous nature try), and she wants any inheritance coming to her to be managed under a trust. We have discussed deprivation. Obviously, it is most desirable to have one trust, with one set of investment fees, one tax return annually etc to keep costs down.

My initial though as how to handle this was the following:

  1.        Appoint the remaining half of H’s Trust onto a new discretionary trust for the benefit of daughter and her issue within 2 years of H’s death so that the new trust will be effectively one settled under H’s Will.
  2.        Use a Deed of Variation of W’s will to redirect funds due to the daughter into the new trust.

However, for IHT purposes, it is my understanding that the new trust would be treated as two separate trusts and, if the money were pooled and invested together, this would result in a nightmare of trying to identify the values at the relevant times when making 10 year returns etc.

Has anyone got any bright ideas or do I have to accept that we will need to run two separate trusts.

Many thanks in advance.

Jessica Measham
Faye Evans Churchers

Keep the H trust and do a deed of variation to add to that, but as you say this will be 2 trusts for iht. Also for income tax it will be settlor interested, so it would make sense to run as 2 funds, which should still provide some savings

Simon Northcott

I should have said the deed of variation trust will be settlor interested, not the H trust

Simon Northcott