Section 146 IHTA 1984 and discretionary will trust

S 146 IHTA has a reading back effect for IHT purposes where a court order is made in relation to a claim under the I(PFD)A 1975, similar to the effect of sections 142 and 144, but without the 2 year time limit.

I need to consider the IHT consequences of an order made where the whole estate was left on discretionary trusts. The order gave an interest in possession to a beneficiary, A, but worded so that it only started from the date of the order, which was more than 2 years after the date of death. A had in fact occupied the trust property since the date of death, but only as one of the discretionary beneficiaries.

My belief is that A’s interest in possession will not be a qualifying interest in possession, notwithstanding the reading back effect of s146, because although the terms of the order are read back to the date of death, the order expressly provided for the IIP to start more than 2 years after the death. It cannot therefore be an IPDI and s144 would not apply.

However, others disagree with me so I am hoping to find some support (or further confirmation that I am wrong) on the forum?

Diana Smart
Gordons LLP