Ten year charge and previous distributions

Trusts Discussion
1

We have a trust which has reached its second ten year anniversary.

There was no charge on the first ten year anniversary.

The assets are now valued at £320,000.

Distributions of £20,000 were carried out in the last ten years but did not attract exit charges.

I assume that I still deduct the £20,000 of distributions from the NRB, even though they did not attract exit charges?

2

You need to establish the available nil rate band first:

  • NRB at 10-year anniversary
  • Less any CLTs made by settlor in 7 years prior to this trust
  • Less distributions to beneficiaries in the previous 10 years which incurred exit charges

If the value of the trust exceeds the available NRB, the excess will incur the periodic charge.

IHTM42086

3

Distributions in the previous ten years are taken into account where such distributions have been subject to an exit charge (ie trust property which ceases to be relevant property irrespective of whether an actual charge arises).

Malcolm Finney