I should be very grateful for any contributions or assistance with my query. My client has inherited a rental property worth £525,000 at death and would like to enter into a Deed of variation to place the property on a discretionary trust of which he and his wife are potential beneficiaries, so that he can have the benefit of all the rental income. Is it the case that he can only gift up to say 90% of the property to the trust but must retain at least 10% between himself and his wife so that he can rely on Section 102B(3) FA1986 to avoid the GWR rules? Must the gift must be settled on a discretionary trust because an outright gift of the 90% to his children instead would not entitle him and his wife to all of the rental income?
If the variation is effective under s.142 IHTA 1984, the gift with reservation rules are overridden as, for the purposes of IHT only, the gift is treated as having been made by the deceased. Accordingly, s.102B Finance Act 1986 will not be relevant.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you Paul, you are correct. The question is whether the objective of securing all of the rent would be better achieved by placing 90% of the property on a discretionary trust under the deed of variation or outright to the children. If the children owned 90% of the property I presume the parents could not be entitled to collect all the rent.