I have a trust, created by a Will dated 2009. Testator died last year. Testator left estate on trust(circa £800,00) to nieces and nephews upon attaining 25 yrs. one beneficiary has asked for an advancement (@22 yrs of age). Would an exit charge apply or can it be written back into will, under s144, as within 2 yrs of death? Would further advances attract exit charges and would anniversary charges apply? IHT was payable on estate so no NRB remains.
Thanks
Unless the will provides for income to be accumulated or subject to the trustees’ discretion until the beneficiaries attain age 25, provided the beneficiary in question was 18 or over at the time of the testator’s death (or attained that age within 2 years of death, thus triggering the application of s.144) the beneficiary has an IPDI and any advance, whilst potentially triggering a CGT charge is a non-event for IHT.
However, if the will directs that the beneficiaries have no entitlement to income until they attain age 25, then if the advance is made within 2 years of the death, s.144 should apply, thus avoiding any IHT exit charge
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thanks Paul, that’s really helpful. The will amends s31 TA to change 18 to 25 but does give trustees discretion to pay income so no IHT event? . Could I just check the situation for younger beneficiaries ie there are 2 who are 10 & 12. If they ask for an advance at a later date, would this incur exit charges? Thanks. Clare
Yes, if advances are made to the younger grandchildren that will give rise to an exit charge as their interests will fall within the IHT relevant property regime.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals