Hello I have two estates in administration. H and W who died fairly close together. NRB DT Wills. The NRB DT in the first estate was administered solely for the benefit of the surviving spouse. It would help greatly in the administration of the 2nd estate if the NRB DT the survivor had the benefit of to be considered as an IPDI by HMRC. No life interest to the surviving spouse was appointed from the NRB DT but it was administered as though it was an IPDI.
Does anyone have any experience of making a case to HMRC that based on the way the NRB DT was administered it should be treated as an IPDI?
It depends (as so often the case) on specific facts, but if the NRB DT was administered for benefit of surviving spouse including income or right to occupy a property to them, then it could be read back under s144 IHTA as an IPDI (assuming done within 2 years of first death). Need to bear in mind of course that as IPDI the right under the Trust is aggregated with value of their own estate.
Ideally a Deed by Trustees confirming the appointment of income / rights ought to have been completed. Not sure how much weight a retrospective Deed would hold (though arguably better than nothing and confirms the factual position and Trustee intention i.e. to grant right to surviving spouse under NRB DT).
I assume the value of the combined estates does not give an IHT problem as otherwise why would you want the trust fund to aggregate with the second spouses estate unless you are looking for a CGT uplift
I must admit I don’t see why it being an IPDI assists with the administration of the second estate as the trust will need to be dealt with by the trustees separately either way but perhaps i am missing something
Thank you for your responses. The tax compliance for the rental income on the half share in the trust would be much more straightforward in an IPDI – i.e. income mandated to the ‘life tenant’ and he returns it to HMRC and pays tax at his marginal rate. Versus with a DT submitting Trust Returns annually to HMRC, paying tax over at special rate, certifying to the individual that the income was mandated to, and him having to claim excess tax back from HMRC being a basic rate taxpayer.