I have a trust created by a will where the deceased died in 1999 creating a life interest for his widow, followed by life interests for his 2 children and then the capital to the grandchildren.
The widow has now died and we are not instructed in the estate but only the trust matter. The trust fund is substantial and there are significant gains within the portfolio. Some of the investment companies have confirmed that they can direct that the interest moving forward be split equally between Fund No 1 and Fund No 2, one for each child. Others cannot and require a trustee account as the income from those current investments cannot be paid to more than one account. Up until the death of the widow all income was mandated to the widow and her own tax returns completed accordingly. The trustees did not get involved in handling any income nd would prefer not to have to moving forward to minimise costs and complications.
My concern is that if we change investments now we risk crystallising a gain and there are substantial gains on the fund in excess of £250,000. The trustees annual exemption has been used year on year. Am I right in that if we retain the current investments but simply redirect the income into a trustee account then there is no issue with capital gains? Further if it comes to the trustees’ account, do the trustees then need to do tax returns for the trust and account for the income and tax to the beneficiaries or can we be a simple conduit? If this is the case what income expenses can we deduct?
One further point relates to what IHT form I need to complete as the trust continues with albeit different beneficiaries? There is an ending of the widow’s IIP so would it be IHT100b? This seems to be when the trust terminates but the trust continues? However, I am sure the fud still needs to be aggregated with the death estate to calculate the overall tax or maybe not? Assuming I do need to aggregate the value of the trust fund with the widow’s estate when I am not getting any information from the executor regarding those values, how can I do this without compromising the position of the trustees? It is likely there will be the NRB, some if not all of the TNRB and the RNRB and the TNRB. However, I haven’t got enough information to categorically say this for certain. Any IHT becoming due on the trust on death this could be quite significant as we have a large portfolio of investments and also a significant property to sell in which the widow lived.
Any help gratefully received.
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