I am speaking to the trustee of a settlement that has taken the residuary estate (each by deed of variation) of three separate individuals (deaths in 2015 and 2017). The beneficiary has an interest is possession and so the trust is an IPDI.
As an IPDI we are not in the relevant property regime. However, circumstances have presented themselves that cause the trustees to consider resettling on discretionary trusts.
I’m happy that the trustees have power to do this, my question concerns the calculation of tax.
I had hoped I might consider that I have three settlors and so three nil rate bands, but I am quickly coming to the conclusion that I should be looking at s52, in which case that’s only one NRB.
Has no-one else has responded I suspect the matter is more complex than I imagine. My comments nevertheless are below.
I assume that there is to be a “resettlement” on discretionary trust.
The resettlement may precipitate CGT charges on the transferor trustees, Trust 1 [TCGA 1992 s 71]. For IHT, the property which ceases to be part of Trust 1 and becomes part of Trust 2 is treated as remaining part of Trust 1 but only for relevant property purposes [IHTA 1984 s. 81]. This suggests that given three settlors of Trust 1, three NRBs apply even though the settlor of Trust 2 is the life tenant of
Trust 1.
The 10 year anniversary is based on Trust 1 start date.
However, the lifetime chargeable transfer triggered by entering the relevant property regime is made by the life tenant and only one nil rate band applies to that.
The trustees of the IPDI trust will be responsible for paying the tax if the life tenant dies within 7 years