I was wondering whether someone could help me to get to the bottom of the following:
Where the life tenant and remaindermen of a life interest trust created by a Will agree to terminate the trust (within 2 years of date of death of testator) in favour of one of them outright under the rule in Saunders v Vautier, does s142 IHTA 1984 apply so that the decision (which effectively varies the Will) is read back as if the testator had made the transfer himself under the Will?
(The trustees do not have any other powers to terminate the trust, so a Deed of Appointment/Advancement (s144 IHTA) is not an option.)
No, but it could be made into a s142 variation. They would have to enter into an agreement specifically varying the disposition of the Will creating the trust so that it was substituted by alternative provision: presumably an absolute interest for each in specified agreed proportions of what would otherwise have been the trust fund. A simple S v V agreement would cause a chargeable event on the termination of the LT’s IPDI and a PET. The potential chargeable amount would be the value of the trust fund taken by the remainderman. That would be avoided by a variation. although it would not alter the IHT payable on the estate.