If this is the usual style of US “living will”, if made by an individual with a domicile within the UK, or includes UK assets, and is made on or after 22 March 2006, it will invariably be within the UK IHT relevant property regime. Accordingly, there will be potential entry, periodic and exit charges depending upon the value of the assets within the trust at the relevant time.
Whilst many of such trusts reserve to the settlor a power to revoke, that does not cause the trust to be outside of the IHT relevant property regime. If the settlor exercises their power of revocation, an exit charge may well arise.
It seems that not only are US Persons being encouraged to use this type of arrangement, regardless of where they might be living or the nature of their assets, non-US Persons (such as those with a domicile within the UK) who happen to be, say, working in the US are also being encouraged to use them (apparently without regard to the potential tax issues that might arise in the jurisdiction in which they are domiciled).
If the settlor happens to be classified as “disabled” (for the purposes of IHTA 1984), the trust could come within s.89A IHTA 1984 and, thus, fall outside of the relevant property regime.
Living Wills, or living nightmare?
N.B. Mindful that people’s circumstances change, there is always the possibility that a living will was “appropriate/best” advice at the time it was entered into and subsequent events have undermined the benefits of such arrangement.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
PO Box 421, Wilmslow, Cheshire SK9 0EX
T: 07712 664127
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