Subsequent Consequences of Distribution from Discretionary Trust Within 2 Years

Trusts Discussion
1

Here’s a point I haven’t considered before.

Imagine a wholly discretionary will, of an estate worth £500,000 of which £250,000 is the value of a property.

Within 2 years of the death the property was appointed to two beneficiaries.

Now, between 3-4 years after that, the trustees want to distribute the balance of the trust fund to beneficiaries.

My question is: does section 144(4)'s provision that “this Act shall have effect as if the will had provided that on the testator’s death the property should be held as it is held after the event” (“the event” being the appointment of the property) mean that the value for the purpose of s68(5) of “the value, immediately after the settlement commenced, of the relevant property then comprised in it” is £500,000-£250,000=£250,000, in respect of the appointment the trustees want to make now? I feel the answer should be “yes” but I’d be grateful for any thoughts on whether I’m interpreting this correctly.

2

My understanding is that the property to which s.144 applies is effectively removed from the trust for IHT purposes as at the date of death of the testator provided, of course, that it passes absolutely under the appointment.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

Brilliant, that’s what I think too. Thank you.