I’m currently looking at two discretionary trusts and their TYA charges. They originate from a single IIP established by Will in 1971 for the deceased’s surviving spouse.
In 2011, a portion of the 1971 trust was carved out into a new discretionary trust with assets that qualified for AR/BR. In 2021 the assets were valued at c£7m and all continue to qualify for AR/BR.
The remaining assets in the 1971 trust were transferred to a second new discretionary trust, also in 2011 but not on the same date. The assets do not qualify for IHT reliefs and were valued at c£3.5m in 2021.
The trustees acknowledge that the new trusts retain the original settlor details and are aware that the 2021 TYAs have not been dealt with yet.
My question relates to the availability of any NRB and/or whether the two new trusts are related settlements. Will they need to share a single NRB, or are each entitled to one?
If there are other considerations that I may have missed, please let me know!
From the details that have been provided, it seems to me that these trusts are treated as separate trusts created by the surviving spouse of the deceased. In light of section 80 IHTA they are not related settlements because they were not created on the same date.
Assuming the surviving spouse made no lifetime transfers then:
The first resettlement will have a full NRB (because the surviving spouse is treated as the settlor and had made no lifetime transfers in the seven years prior to when (s)he is regarded as creating the settlement) and
The second resettlement will have a full NRB (ditto the above, bearing in mind the chargeable value of the transfer of value into the first resettlement was nil after taking into account reliefs and allowances).
Caveat - section 80(3) says the section does not apply ‘if the occasion first referred to in subsection (1) above occurred before 27th March 1974’. I think that is a reference to the date of the first resettlement, not to the creation of the interest in possession for the surviving spouse. However I’m not 100% sure.