Is it possible to create a Life Interest Trust as part of a Deed of Variation on an intestacy? I have researched this topic in depth, but am struggling to find an answer.
Yes, it’s not an issue – I have seen it done many times.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you Paul. Do you know where we would be best placed to find a precedent for this?
Yes, if the proposed life tenant is still alive at the date of execution of the variation. If not HMRC will probably challenge it. IHTM35025 states their view that a life interest cannot be re-directed after the death of the LT. There is no specific comment on this cognate point but a lifetime of observing the proclivities of the beast makes me suspect that they might take a similar view; particularly if it turned an estate wholly or partly exempt.
It is hard to see why HMRC would adopt either position as s142 clearly directs that a IHTA applies as if the variation had been effected by the deceased. Their specious argument is that it is not a variation at all. All variations are by definition counterfactual so bear no resemblance to the “real world”. Statutory deeming provisions often require judges to determine how far their consequences should extend but not here.
In IHTM35042 they accept that a dead person can make a variation (per their PRs) but repeat their unjustified refusal of a re-direction of a life interest conferred under the estate of the person pre-deceasing which is being varied. This is like arguing that the Mad Hatter is a fictional character but the March Hare is a real person.
Jack Harper
In my customary role as one who does not make friends and influence people, if you do not know where to find a precedent, should you be undertaking the task and will your insurers back you up in the event of a poo/fan interface?
Jack Harper
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