I am acting for a widow who is given a life interest in residue which thereafter passes into a Discretionary Trust in which the widow is one of the beneficiaries.
The residue is only just over £10,000. The widow would like to release the life interest after which the Trustees are intending (but not obliged) to appoint the fund to the widow to terminate the Trust.
We want the release to be a PET.
I believe a disclaimer would be read back in to the Will but would a Release of her life interest also be read back if it was signed within two years of the death
If the disclaimer is made to enable the trustees to appoint to the widow, this could well be “consideration” which negates the effect of the disclaimer.
Does the will give power for the trustees to make an appointment of capital even whilst the life interest is ongoing? If so, an appointment of the remainder to the widow may well result in a merger of the life interest and remainder, giving the widow an absolute intertest, with no IHT consequences.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
There is no such power.
My thinking is that a disclaimer would immediately start the Discretionary trust and therefore use up part of the NRB, whereas if the widow surrendered the life interest having potentially benefited from it (currently for the 7 months from death) that would be a PET
On the assumption that s.93 IHTA 1984 wont apply (provided the widow has taken some benefit from the life interest in the 7 month period so cannot refuse her interest) I’d have thought s.142 IHTA 1984 could be applicable instead.
Is it not a condition of s.142 that, for the reading back provisions to apply to a variation of any disposition, or disclaimer of any benefit conferred by a disposition, there must be specific written confirmation within the variation/disclaimer document that s.142 is to apply to the variation/disclaimer?
Assuming the above is correct, could you then prepare a document surrendering her life interest without referring to s.142 or instead, for avoidance of doubt, specifically confirming s.142 isn’t to apply, and that should avoid the it being read back into the will?