Nil Rate Band Discretionary Trust

Trusts Discussion
1

I have come across a matter where instead of a Deed of Variation creating a NRBDT, a Discretionary trust was established by the widow and signed the day before the DoV, with the DoV leaving 50% of the value of the house (£160,000) to the trustees of the Discretionary Trust (rather than the whole of the nil rate band which was £242,000). A loan agreement was also signed which specifically refers to £160,000.

My queries:

  1. Is it possible for assets to be left to a trust that was established after death?

  2. If so, am I right in thinking that only the £160,000 will be a debt to the wife’s estate? The loan agreement is silent as to interest and indexation.

  3. Therefore on wife’s death she will only have her NRB, plus RNRB, plus TNRB which will be £110,124 rather than £325,000 if no trust. Would the transferable RNRB still be available to transfer as the property not put into trust, just the some of money

  4. Is there anything that can be done now to try and obtain the full NRB of deceased spouse?

Thanks

Sally-Ann Joseph
QS Rose & Rose

2

There is nothing wrong with having the trust provisions set out separately to the DOV.

Clearly £160,000 of the NRB was used up. Unless the first death was less than two years ago (in which case the assets could be appointed out to the widow and s. 144 IHTA would relate this back) there is nothing you can do to reinstate a full transferable NRB.

There is a question mark over the remaining £82,000 owed to the discretionary trust. Was that sum appointed out to the widow within two years of death (in which case it does not use up the NRB). Or was £160,000 the full extent of the estate? In any other case then you may not have any transferable NRB and the first estate remains only partly administered.

Paul Davies
DWF LLP

3

There were no other assets in the estate, just the share of the property, so I would assume that £82,000 is available to transfer

Sally-Ann Joseph
QS Rose & Rose