Can anyone please help clarify the correct IHT treatment of a 2009 Discretionary Settlement in the following circumstances:
- Wife W died in January 2008 leaving her estate to her husband H. At death she had an interest in remainder in a 1970 Settlement, the life tenant being her mother.
- In January 2009, H created the 2009 Trust to receive property from W’s estate under a Deed of Variation with a s.142 claim.
- In June 2009, H assigned the remainder interest in the 1970 Settlement to the 2009 Trust
- In December 2009 the 1970 Trust life tenant died and the trust property passed to the 2009 Trust.
Am I right in thinking that for IHT purposes I have two separate settlements under s.44(2) IHTA 1984- Trust A created in January 2008 by W deceased and Trust B arising from the 1970 Trust?
If that analysis is correct, do the B Trust IHT charge dates derive from the 1970 Settlement and who is the IHT settlor of the B Trust? Is it the original 1970 Trust settlor, the life tenant or someone else altogether?
CK, Chartered Accountants
Yes you are right Belinda.
Always assuming H did not have an interest in possession in the settlement he created by deed of variation (and presumably he didn’t because the point of creating the trust would, I imagine, have been to bypass H’s IHT estate) you have, as you say, Trust A
treated as created in January 2008 by W deceased and Trust B arising from the 1970 Trust?
The 10 year charge dates follow the two trusts, so Jan 2108 for the A Trust and 2020 for the B Trust.
The original settlor of the 1970 Trust is still treated as the settlor of the B Trust.
Anthony NixonIrwin Mitchell Private Client
Many thanks Anthony – I appreciate your advice. You are correct in thinking that H is excluded from benefit in the deed of variation
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