The IHT Manual does not seem to cover this point.
However, it seems to me that as the transfer into trust is an immediately chargeable transfer against which relief is sought, the appropriate account should be sent to HMRC when the trust is set up, and the relief claimed at that time. The application for the relief should be supported by appropriate medical reports (do you need specific written authority from the settlor to disclose the report(s) to HMRC?)
If HMRC does not accept the settlor qualifies, then a charge to IHT might arise and/or the settlor may become liable to penalties for late disclosure.
I can understand a reluctance to report the transaction now as the medical report that would be required might not “tick” all of HMRC’s boxes. However, if the settlor should die before the condition in question progresses to the stage where they are clearly within the definition of “disabled” for the purposes of s.89 IHTA 1984, HMRC might the refuse to allow the relief and impose penalties etc.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals