Background is a will trust created in 2010 with Life interest to spouse and children as trustees and remaindermen holding the property in which the life tenant lived so no income or gains.
Trust registered last year.
Mother dies so at that point the trust ends and the trustees are holding as bare trustees for themselves. As this would fall into one of the exclusions I was going to close the TRS record and I would think that is right.
But in this instance we have an IHT liability because of the aggregation of the estates and having a liability is a trigger to register!
Any suggestions as to what should be done? Do i close the record or amend it to a tax paying trust and then close?
I do not know either what “closing” a trust is as a legal concept or what HMRC mean by it as it is not a term in the Regs nor do they explain it in TRSM. They presumably mean that the trustees are functus officio because there are no longer any assets or liablities of the trust or of the trustees as such as opposed to their personal liability e.g for historic breaches. Is the bare trust express or, as I suggest, rather by operation of law. There is no blanket exemption for a bare trust (TRSM10030) so I would say it is not separately registrable. If the trustees retain a lien over and possession of the property for payment of IHT I would say that the original trust has not yet closed and will not while that subsists but if the trust asset is distributed subject to the beneficiaries paying the IHT with an indemnity personal to the trustees it would then close. All this is much too subtle for the Knuckledraggers at HMRC one suspects.
I have just resolved a similar situation so am posting here in case the info is of use to others. Case: Non taxable discretionary XM trust registered with TRS, settlor (also a trustee) dies. When the fund (loan plan) was encashed, payment was direct to lead Trustee, who was also the beneficiary. Tax: on encashment a chargeable gain certificate was issued so beneficiary can choose to reclaim income tax paid if relevant, details of growth were included in the tax return for settlor’s final year of life, value of the remaining loan was included in IHT declaration. So far, all as confirmed with accountant. They also told me I would have to complete a trust tax return before closing the entry in TRS, this was incorrect. An HMRC trust dept advisor confirmed that, as it was a discretionary non taxable trust the trust ceased on pay out of the funds (encashment marked it’s official end date); the register does not need to be updated with details of settlor’s death, it does not need to be registered as a taxable/bare trust, no trust tax return is due, and the only requirement is to close the trust registration entry online. He confirmed that as all taxes which were due have been declared and paid to the correct departments and that the Trust dept has ‘no interest’.