We act for the trustees of a Discretionary trust and qualifying disabled person’s trust under s89B(1)(a) IHTA 1984.
The trustees/settlors of both trusts are the parents of the disabled person.
Discretionary trust was created in 2010. The disabled person’s trust in 2021.
Trustees wish to move property from older trust to the newer trust.
For IHT purposes will the transferred property be treated as remaining in the first settlement under s.81 IHTA 1984 and if so continue to fall within the relevant property regime?
s81 treats transferred property as belonging in the transferor settlement and not the transferee settlement as regard the operation of the RPT regime " unless in the meantime any person becomes beneficially entitled to the property (and not merely to an interest in possession in the property)". So the chain can only be broken by beneficial entitlement. The deemed IIP created by s89(2) won’t do it. However the effect of the deemed IIP is that ss 53 and 54 will prevent a charge arising on the termination of it wholly or in part in some circumstances e.g. if property is appointed to the disabled person. While and to the extent that the disabled person’s interest subsists in any of the settled property it is not relevant property for s58 so no RPT charges can bite despite s81.