If a settlor creates two lifetime settlements, and on his death a (Discretionary) Will Trust is created, are all the settlements related? More specifically, is the starting rate band split in three between all the trusts, or split between two for the lifetime trusts, with the Will Trust being unrelated?
(All the examples I can find simply relate to multiple lifetime trusts only.)
In your example each trust would get a third of the standard rate band (and CGT AE assuming all made after June 1978) as you look at the number of settlements in existence during the tax year by the same settlor whether inter vivos or under a will.
Re the CGT annual exempt amount, the trustees are entitled to 50% of the amount due to an individual unless the same settlor has made more than one “qualifying” settlement in which case the 50% annual exempt amount is divided by the number of such settlements (for settlements created on or after 6 June 1978).[TCGA 1992 s 1K and Sch 1C].
Re the standard rate band, it is divided by the number of “current” settlements (ie those in existence in the relevant tax year) created by the same settlor. [ITA 2007 ss 491/492].
In both the above cases settlements created in lifetime or on death are included.
If any of the settlements is a settlement for a disabled person, whilst it would still be within the group for identifying the proportion of the CGT annual allowance available to the trustees, the trustees of such settlement would be entitled to the relevant proportion of the full individual’s annual allowance, rather than of the 50% allowance otherwise available to trustees.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals