How HMRC treats a US revocable trust

Where a UK domiciled individual died with a US revocable trust, can the trust be appointed to the surviving (UK domiciled) spouse within 2 years thereby benefiting from the spousal exemption?

Raveet Phull
Perkins Coie

Unless a US revocable trust can be construed as a “will”, which I believe would be straining construction beyond breaking point, it would seem to none a non-starter, mindful of the opening words of s.144(1) IHTA 1984:

Subsection (2) below applies where property comprised in a person’s estate immediately before his death is settled by his will.

The requirement that the property is settled by the deceased’s will carries through the section, even for deaths post 21 March 2006.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

Some of the issues of UK grantor trusts have been discussed before on the Forum - try searching the archive for, say, grantor.

A US trust may constitute a settlement for IHT purposes, or just a bare trust, or Will, effectively ignored for IHT. That depends on the drafting: see my Taxation of Nonresidents & Foreign Domiciliaries (2020/21) para 102.7 (US grantor trust).

James Kessler QC
15 Old Square
Lincoln’s Inn

Thank you both for your helpful replies.

Raveet Phull
Perkins Coie