I wonder if someone can please confirm I am along the right lines.
I am dealing with the estate of J. In 2014, J transferred her main residence into a lifetime discretionary trust together with the sum of £10 (on the same day!). The value of the property at the time was £100,000.
Under the terms of the trust, J is the principal beneficiary. J was entitled to any income from the trust fund during lifetime. Other discretionary beneficiaries are named as J’s nieces and their issue.
J has now died in 2026. For the purposes of completing and submitting the IHT400, am I correct in thinking that I declare the date of death value of the property as a GROB on the IHT403? J lived in the property rent free up until death.
Incidentally, while nothing turns on it here, I would not usually refer to a trust in which a person has a right to income as a discretionary trust. Rather it is an interest in possession trust, with discretionary overriding trusts/powers or discretionary trusts in remainder (or both). That doesn’t stop it being relevant property or a GROB for IHT.
I agree. The 2014 transfer has ceased to cumulate of course. There will be no RNRB as the GROB was made to a trust: cf s.8J(6) IHTA.
For CGT there will be PPRR for trustees but after the death a non-exempt period will begin if no other eligible beneficiary resides to satisfy the condition for relief ; although the last 9 months of ownership before any future disposal will be a qualifying period.
In the above query there was a potential IHT charge in 2024, but on the value given the property is unlikely to have exceeded £325,000 and also there was unlikely to be a settlement of other assets. at the time.
Further the CGT PPR needs to be claimed in a tax return.
I have a similar situation but let’s assume J is still alive and coming up to the first 10 year anniversary, (2028). If the property were appointed out to J now, then I believe we escape any exit or 10 year charges (as no other gifts in the years preceding or post 2018). Also, the RNRB will become available again. I think this is right but would be grateful for confirmation. Also in my example H settled the property but wants to give it to W. I think this may trigger some GROB issues and so to avoid any unnecessary complications, I am minded to simply appoint to H who can then decide to give to W, but I think it is the same outcome if given straight to W.