Minor and share of residuary estate

Testators wish to leave their residuary estates to each other. On the second death the residue is to be split in unequal shares between one child and two grandchildren. One of the grandchildren is currently 17. They wish to include a contingency so that they cannot receive this until they are 25.

The share is likely to be about £90,000.

Please can someone briefly outline the IHT position regarding this and also Income/CGT implications.

Many thanks

The contingency must involve a trust so it will be a relevant property trust for IHT unless s31 TA 1925 is excluded, in which case it will be an IPDI trust if the grandchild is not still a minor at the date of death. For CGT it will be settled property (if it holds chargeable assets) because the grandchild will not become absolutely entitled until 25, unless already having attained that age at the date of death.

s32 TA or an express power of appointment may be allow the trust assets to be advanced/appointed before 25 which may result in an IHT charge in a RPT, depending on the rate chargeable, but not in an IPDI trust, and a CGT deemed disposal of any chargeable asset. Unless the asset concerned is a business asset, hold-over relief will only apply if there is an IHT charge, so not on an IPDI beneficiary becoming absolutely entitled.

TRS will need to be considered if the trust endures beyond 2 years after death.

It is possible that by the second death the grandchild will have attained 25. If not, a gift over should be included to cover his or her dying under 25. If the grandchild were to predecease the second to die, provision should be made to cater for lapse, if only to rely on s33 WA1837, or by a substitutionary gift.

Jack Harper