I am wondering if anyone has had a similar situation.
H died in 2014 and the house was placed into a Discretionary Trust (children as trustees and children and spouse as beneficiaries). W has now died and although the clients believe that the Discretionary Trust was dealt with and everything passed to their mother, they cannot locate a Deed of Appointment. They have approached the solicitors for this but they have confirmed that they do not retain any copies of the file. The property was transferred into W’s sole name when the H died but I cannot see that the Trust was dealt with.
What happens if the Deed cannot be located, is there anyway to claim the transferable NRB and transferable RNRB i.e. could we put half the value of the property at the date of H’s death as a loan against W’s estate? If so, would the clients approach an estate agent to value the property as it would have been in 2014 (which may prove difficult).
I think that we would have to bring the Trust to an end by way of a Deed of Appointment and would need to file an IHT100. I am sure no 10 yearly charges have been paid.
The estate is already taxable if we had use of all of the allowances!
It is disappointing that, only 10 years on, the solicitors no longer have the file.
In the absence of the deed of appointment, and on the basis that one was completed, perhaps the way forward might be for one, or more, of the children to make a statutory declaration as at their recollection of when the deed was made, and the effect thereof. This can then be presented to HMRC in support of a claim for the transferable NRB and RNRB (if required)
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Just echoing what Paul said about file retention. It’s scary that a firm would dispose of a file covering the establishment of a trust so quickly (even after GDPR).
Is it worth checking whether they have retained electronic copies of their own work - even an unsigned deed in word format would be a good indicator that a deed was executed (and its terms).
No doubt everybody involved would be content if there were a deed of appointment but it is HMRC they need to convince, bearing in mind that HMRC are fully aware of the position that such will trusts have often not been dealt with properly by lay trustees, because they did not seek advice, and the tax consequences appear unattractive to the beneficiaries: IHTM43016
A DT on the death of the first spouse to die, using up the NRB, became less advantageous for deaths after 9 October 2017 when the NRB became transferable. Of course many wills made earlier remained unaltered. This was just a nuisance in most cases. One was that the death preceded an increase in the threshold but here it was already £325,000 for a death in 2014. The big disadvantage did not arise until 6 April 2017 with RNRB and TRNRB (“brought forward allowance”). The husband could not claim RNRB as he died before, so the fact that the property went into a DT does not matter, though it would now. The wife could easily have avoided that by ensuring her children have under her will a QRI or a QRFI. And she (her PRs) can then claim a full TRNRB from her husband: IHTM46041, example 1. Has she done that or is a variation possible if not? You do not say. Nor do you say whether the value house absorbed the whole NRB or over- or under-shot.
A key fact is that you say " The property was transferred into W’s sole name when the H died". You do not say who the executors were but they should have transferred the title to the house (I hope H was the sole proprietor and we are not dealing with a share, you indicate not) to the children as trustees. So an important paper trail is to seek the identity of how exactly the legal title was transferred from H to W. The Register is about the legal interest but, as HMRC is never tired of telling us, in cases of doubt or dispute they look first at the owner of the legal title to ascertain the owner of the equitable interest. Prima facie after H’s death someone, with legal authority sufficient to convince HMLR, transferred the title to W. I would suggest that, in the absence of contrary evidence that she was a mere nominee or bare trustee, it also carried the equitable interest.
You are then left with a distribution out of the DT on the date of transfer, almost certainly at a nil rate of IHT if H had a nil cumulation at death and there was no related settlement. It would also be a disposal for CGT but either or both the gain would have been small and covered by PPRR if it was their home. It seems unlikely that the IHT transfer was an excepted transfer because presumably the trust was intended to contain the house at a value within the NRB. You do not state whether any other assets went into the trust but it seems as if there are none in the DT now. No doubt it has not been registered on TRS. The best thing is to establish the facts surrounding the title transfer (why were the children ignored as trustees in that if they were?), ensuring so far as possible there is no contrary evidence to trip you up, and then present a case to each branch of HMRC and seek their agreement on the consequential regularisation and any tax payable.
That will depend on the terms of the will. Some wills require any appointment to be by deed, others are silent, so that no deed is required.
If the will in question requires an appointment be made by deed, and there is no evidence that a deed was prepared, let alone executed, on what grounds was the property transferred to the widow? It may be appropriate to consider obtaining advice from Chancery counsel to identify how the matter might be resolved.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I would enquire of the Land Registry. The property could not have been transferred to the wife’s sole name without an explanation if there was a Trustee restriction on the register in when the husband died. It may be that whilst the Will refers to the DT, the title was registered in the joint names of husband and wife as joint tenants, at the husband’s death.
Hope this helps
Carol Gregorious