IPDI an IHT Problems

Trusts Discussion
1

Hello,

  1. Life tennant has died the assest value of the trust is £400,000. The £400,000 is included in the LT estate for IHT.

  2. Trustees want to pay the beneficiaries the 400k less any IHT.

  3. LT dies intestate, the spouse (who doesnt benefit from the trust) wont administer the estate. Doesn’t care as there are no other assets.

  4. The trustees are now stuck! They cant calculate the IHT they cant pay the IHT therefore cant settle the estate! Beneficiaries are not happy.

Has anyone come across this issue?

Richard Bishop
PFEP

2

No, I haven’t. But have you seen the new IHT100b (death) form? Tell HMRC about the end of a qualifying interest in possession because someone has died (IHT100b (death)) - GOV.UK

HMRC says that the trustees should: “Use this form to tell us that a beneficiary’s qualifying interest in possession in a trust has come to an end due to their death and Inheritance Tax is due”.

Presumably, it would be worth sending a covering letter to HMRC to explain the lack of administrator (or ask the beneficiaries to apply for a letter of administration). Hopefully, HMRC will then write back and set out how much tax is due. But I have no experience of this.

3

Thanks Tigs thats very helpful.

Richard

4

Submit iht 100 and with it a written clearance application

Include a letter explaining the problem with the free estate.

Simon Northcott

5

One thought is that if the estate is an intestacy with no, or very few, assets then it will be spouse exempt. That being true you can calculate the tax (400,000-325,000)@40% (or whatever other adjustments might apply) and offer to settle with HMRC on that basis. Probably more acceptable to your beneficiaries than trying to force the widow(er) to take any action??