Under the terms of W’s will a “Kessler” discretionary trust was created, over two years after the death the Trustees appointed the income to life interest Beneficiaries revocably and various appointments in and out have happened over the years. The Trustees now wish to end the trust, all income taxes and CGT have been paid. The life interests have not been revoked although there is no further income. I am unsure of the tax status of the trust property; can I just appoint out to the beneficiaries or does it revert to being a DT? The value of the Trust is over £325,000 so if it is a DT exit tax would be due or does it remain outside the regime if it is appointed to the life tenants? Any thoughts would be much appreciated.
Assuming the LIs were created after 2006, it’s still within the relevant property regime so exit charges will apply.
Exactly which powers would have to be exercised will depend on the wording of the relevant documents. This may (or may not!) include an express revocation of the IIPs over the relevant assets. Exit charges apply regardless.