IHT exit charge from Discretionary Will Trust

Trusts Discussion
1

I am dealing with an estate which contains a discretionary trust of residue. The executors have decided to continue the trust beyond the usual two year period and they have now made capital appointments for which an IHT100 is required. I realise that the date of commencement of the trust is the date of death but what value should I use as the value of the trust for box 2.1 of form IHT100c?
The information requested is the “value of the assets comprised in the settlement immediately after it commenced”.

This could be:

  1. The residue as calculated in the IHT400 which lists the assets and liabilities at commencement, adjusting for pecuniary legacies and IHT payable on death.

  2. The capital amount due to the trust once the administration of the estate is complete including deduction for the costs of administering the estate, read back to the commencement date.

  3. Nothing as no assets have been appropriated to the trust from the estate and sums appropriated should be included in box 2.3 “value of any assets added to the settlement after the date on which it commenced at the date they were added”.

Any guidance from someone who has dealt with this before?

2

Hi Jeremy,

My view is that your option 2 is the most accurate and the figure I use generally taken from the estate accounts.

The guidance from HMRC for entry at 2.1 is “Write in the value of all the assets put into the settlement on the day it started. Those assets are to be valued at the date the settlement started. When valuing them it should be assumed that the settlement had already started.”

On that basis I would suggest that your suggestion 3 does not apply.

3

Thanks Anthony - very helpful.

4

I would be inclined to agree option 2 as best option. Further is the need to consider when Trust was constituted. For tax purposes it is DOD as we know, but this is not a true reflection of when Trust commenced in reality / practically, which would usually be end of estate admin.