Residence Nil Rate Band and Disabled Persons Interest

Trusts Discussion
1

I am dealing with an estate with a disabled person. In her Will the testator set aside her estate on a standard discretionary trust with her daughter in the pool of beneficiaries. The deceased’s daughter is in receipt of PIP and is disabled. There is a letter of wishes with the Will which stipulates that the deceased’s daughter is to be treated as a principal beneficiary of the trust.
The estate is taxable but we could reduce the tax liability by claiming the residence nil rate band. Is it enough to present the Will and Letter of Wishes to HMRC together with proof of the daughter’s entitlement to PIP to claim the RNRB? Or should the trustees appoint out on to a trust that complies with s89 Inheritance Tax Act?

Also could that trust be a disabled person’s discretionary trust; or should the trustees appoint out to an interest in possession trust.

I would welcome members’ views on this point.

Ben Holden
MacDonald Oates

2

I wonder whether (as the wishes indicate) the intention was in fact for the benefit to be applied only for the disabled person / daughter. If the Trustees are intending to grant the wishes i.e. daughter as sole beneficiary of the Trust and will complete an election under s37 Finance Act 2005. I would also prepare Trustee minutes confirming that they consider the discretionary Trust to comply with all aspects of vulnerable person Trust and that they will administer it as such / their intention to respect (if not bound) by deceased’s wishes). Together with the documents you have suggested, this ought hopefully be acceptable to HMRC to qualify.

I would not appoint out to an IPDI (at least not before a full review of disabled person’s circumstances) as that could be detrimental to daughter’s situation.

Philippa Jayne Bavington
Giles Wilson LLP