Maintenance payments under consent order - IHT deductible

Good morning.

Does anyone know whether it is possible for maintenance payments which are required to be paid for children under a Consent Order are IHT deductible on death? If my client died this year, he would still have around £250,000 of maintenance left to pay and he has asked if this would be treated as a DOD liability and would be free of IHT. My thinking was no but if anyone else can confirm I would be grateful.

Thank you.

On the basis that the order is legally enforceable a deduction would seem in principle to be obtainable. Presumably the order requires continued payment after the payer’s death (ie does not cease on the payer’s death in which case there can be no deduction).

The quantum of the liability on death is the aggregate discounted amounts of the payments due for payment post the payer’s death.

Malcolm Finney

Would it be possible to transfer a lump sum c. £250,000 to trustees and claim exemption under IHTA s.11 (1) (b)?

Actuarial input would be required to calculate the value, at the time of transfer, of the ongoing maintenance liability.

I think the problem with a trust is that the relevant property regime will apply going forward thus possibly giving rise to exit and ten yearly charges. An entry charge should be avoidable under IHTA 1984 s 10.

Malcolm Finney

Thank you all for your thoughts. I am not sure the client will want to set up a trust for such a small amount of time but it is an option.