Clients wish to remove the NRBDT in the Will post death of the Testator AND vary the Will by Deed of Variation to pass the residue of the estate to children.
Can both be achieved by Deed of Variation OR is the best course of action to collapse the NRBDT separately to the Deed of Variation?
Is the widow alive? If so, DoV may lead to immediate IHT charge on the estate. PETs by widow may be better option.
Deed of Appointment re: NRBDT. Then vary residue with DoV.
My view is that the collapse of the NRBDT and variation of residue should be done by separate instruments, unless there could be an argument that one would not be done without the other, in which case s.142(3) IHTA 1984 might apply.
Clearly if the NRBDT and residue are to go the same way, s.142(3) is likely to be irrelevant. However, if s.142(3) might apply, it would be necessary to bring the exercise of the discretion over the NRBDT within the variation. Many years ago, I was told by HMRC that this is possible, although any such variation would need to be carefully drafted to ensure compliance with the relevant provisions of the IHTA.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The point which no-one has made explicitly is that you generally can’t remove or terminate a NRBDT by Deed of Variation. In that light Paul’s advice that there should be two documents - a Deed of Appointment for the trust and a Deed of Variation of residue - might be the only course available.
Yes, as I said, Deed of Appointment re: the NRBDT…residue with DoV.
Though if widow/er alive, and subject to age/health, may be better to appoint/terminate NRBDT so they make PETs. Same with residue, as could survive 7 years so may then have 2 x NRBs on survivor’s death, which won’t be possible if done by DoV.
Depending on circumstances, there is an argument to maintain NRBDT as that may outperform increase in NRB(TNRB) overtime.