Related Settlements advice

I was wondering if you can help on this one. My firm is dealing with an estate where the deceased left her entire residuary estate on discretionary trust. The trust comprises of cash, farming interest and 1.2 share of property. The firm has advised the trustees to do a deed of appointment (within 2 years) which gives the farming interest to the son, cash absolutely to surviving spouse and the deceased’s 1/2 share of the property on a life interest trust for the surviving spouse (for asset protection purposes). On the death of the life tenant, the property would pass 25% each to three children and the last 25% into discretionary trust. The surviving spouse has a Mirror Will of the deceased and his Will also sets up a discretionary trust of residue on his death. My question is, when the QIIP ends on the surviving spouse’s death, a discretionary trust is set up for the 25% but the surviving spouse also has a DT in his Will, so are they related settlements for IHT? Would it make a difference if the 25% was settled on a Disabled Person’s Trust, rather than a DT? Thanks in advance and hopefully that makes some sense.

I do not think the trusts referred to are related for IHT. This requires the same settlor to set up more than one trust with each trust commencing on the same day.

On the death of H (surviving spouse) under his will a DT is set up.

On H’s death his QIIP terminates with the trust property then being held on discretionary trust. The QIIP arose under a trust set up following W’s death by deed of appointment. S144 applies and the trust containing the QIIP is treated as set up by W.

Hence, there are two different settlors H and W and different dates of commencement.

Malcolm Finney

I appreciate that I am responding rather late to this post, but have waited until I had time to re-check the position, as I am not sure that I agree with Malcolm Finney.

I suspect that Natalie is thinking of the effect of s80 IHTA, and I am inclined to agree with her. I believe the effect of that section in her case would be to deem the surviving spouse to be the settlor of the DT arising on his death from his wife’s estate, and the commencement date to be his date of death. The result would cause that DT to be related to the DT under his own Will.

Happy to be shot down.

Diana Smart
Gordons LLP