Life Interest Trust and IHT

My set of facts are as follows:

Mum dies in 1961. Husband has predeceased her. Her will provides a life interest for son in farm which includes house, buildings and approx 200 acres.

Trust has never been brought to the attention of HMRC.

Son has now died. 3 grandchildren are remaindermen.

Valuing life tenants estate: Free estate is of low value and passes to surviving spouse. Trust is estimated to be worth somewhere between 980,000.00 - 1,450,000.00.

The reason for the broad estimate is the potential difference between Agricultural and Market value of a small part of the land. Realistically the increased market value would be entirely dependent on one special bidder who we , at present, do not know whether they are interested in buying the land. Historically an approach was made to the life tenant to purchase the parcel of land which would be used for commercial purposes.

We do not require a grant of probate to deal with any aspect of the deceased’s estate.

My question is: Do I need to submit a return to HMRC if potentially there is no tax to pay i.e spousal exemption on free estate, APR available (we expect) against most of the farm and rest under NRB. Essentially value would not be determined with HMRC unless return submitted but can the Trustees rely on the valuation that they have obtained as the reason not to submit the return?

In any event are the Trustees obliged to submit an IHT100 even though HMRC have never been made aware of the trust, if in their opinion there is no tax to pay?

Thank you all very much in advance for any help you can provide.

Harrisons Solicitors LLP

On these figures an iht100 will be required, and the trustees will want the comfort of formal clearance.

See May special edition 2003 of the iht newsletter confirming the only time an iht100 is not needed on death is if it is an excepted estate.

Simon Northcott

I considered a very similar situation I am dealing with yesterday and spoke to HMRC who told me that the deceased’s executors must complete IHT400. As the value of the aggregated trust exceeds £150,000, the estate is not an excluded estate.
Presumably the trustees of the qualifying life interest trust should also complete IHT100.

Ann Corke
Humphries Kirk LLP

I agree with Ann IHT400 IS required. In any case if you are relying upon AR this must be claimed

Patrick Moroney
BWL solicitors