A Will is varied in 1992 to create a Discretionary Trust with very wide powers. By a subsequent resolution in 2001, the trustees resolve that they hold a certain part of that trust for x during her lifetime. By a Deed of Appointment (after 2006), the trustees purport to exercise their original discretion further confirming that the trust is held for x for life but with overriding powers of advancement of capital. What are forum members views on the IHT treatment of the trust after the 2001 resolution and then after the Deed of Appointment?
Brewer Harding & Rowe
We are not told what the Trustees have to do in order to change the nature of the trust and you need to refer to the trust instrument for this. Typically, a change of this nature can only be effected by Deed of Appointment and, if that is what the trust instrument requires, the resolution may not have been effective to remove that part of the Trust Fund in which the purported interest in possession was to arise from the relevant property trust regime.
Having said that, did the Trustees report the distribution into the IoP trust to HMRC in 2001? What did HMRC say about it? How have the subsequent 10-yearly charges been reported to HMRC and did the first include reference to the distribution?
Coles Miller Solicitors LLP
There is no requirement for the amendment to be made by deed; there is a wide power allowing the trustees to treat the trust this way with the consent of x which was given as they joined in the “Resolution”. I am not sure whether the Trustees reported the change to HMRC and anticipate the value at that time would have been under the nil rate band.
Assuming the 2001 Resolution is valid, my concern is the IHT effect of the subsequent Deed of Appointment and whether this changed the Trust from a life interest trust to a Relevant Property Trust given the requirement under s49A for an IPDI to be created on death of a testator. I think the intention was for the trust to remain an IPDI (as under the 2001 Resolution) but fear this may not have been achieved given the further deed was completed after 22 March 2006.
Any enlightenment and clarification from forum members will be greatly appreciated.
Brewer Harding & Rowe
I suggest the precise wording of the post-2006 document is the key to
It seems to me that this may require more detailed consideration than is
available via the TDF.