I act for the trustees of a very old will trust that left a life interest to the deceased’s niece (L). L died earlier this year and at the time was resident and domiciled in Jersey and had no UK assets. However, as a result of my trust and two other trusts in which she also had a life interest inheritance tax in the UK is payable as combined value of the three trusts exceeds the available allowances. All three trusts are onshore.
The rules for apportionment of income were not excluded under the terms of my trust. As the remaindermen of my will trust are the same people as the residuary beneficiaries under L’s will and take in the same proportions, ordinarily I would not go to the trouble of carrying out the apportionment exercise. However, it might be worth the trouble if the apportioned income is considered to be a non-UK asset of the deceased and thereby escaping inheritance tax (L being non domiciled and therefore only subject to IHT on her UK assets) and at the same time reducing the value of my trust for inheritance tax purposes
The question is therefore whether the amount of the apportioned income would be considered to be a UK asset of the life tenant or not.
Ian Bowyer
GRM Law