I am working with a settlor-interested Trust, created by deed of variation by our client after his father died in 2015. Cash was settled into the Trust and in 2017. the cash was used to buy a property, currently let as a Furnished Holiday Let, and our client is the sole beneficiary of this Trust.
I am no Trust expert and will advise the client to refer to a specialist, but I need to warn the client about the impending 10 year charge and want to clarify one point for my own understanding. When calculating the 10 year charge, whose nil-rate band is used? Is it that of the late father or that of our client?
If the client is the sole beneficiary of the trust, is there a trust other than a bare trust - in which case no 10 year charge would arise.
Even if set up as a discretionary trust, if there can only be one beneficiary it is more likely to be a bare trust outside of the relevant property regime.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Paul Sanders: Apologies, I have looked closer at the deed of variation creating the Trust and it states:-
“The “Discretionary Beneficiaries” shall mean: (a) “our client” (b) the children and remoter issue of “client” whether living at my death or born thereafter”.
Presumably now the 10 year charge does apply and as Andrew Goodman explains, it is the NRB of the late father we need to consider?
" (1) Where within the period of two years after a person’s death—
(a)any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or
(b)the benefit conferred by any of those dispositions is disclaimed,
by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions, this Act shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.
(2)Subsection (1) above shall not apply to a variation unless the instrument contains a statement, made by all the relevant persons, to the effect that they intend the subsection to apply to the variation"