I have a will which creates two trusts (a) trust for life over half of the matrimonial home for surviving spouse and on surviving spouse’s death RNRB amount in trust for children (2) balance in trust for spouse for life and children as discretionary beneficiaries. The trusts have the same settlor, trustees, beneficiaries and are created by the same will. Do I need to register both trusts separately?
It might depend on the drafting, which given you pose the question at all, may indicate the settlor’s intent may be construed as to create separate trusts. One bequest may be a specific gift and the other residuary. But it sounds as if the surviving spouse has a life interest in the whole with only the remainder bifurcated.
On the death of the LT there would seem to be 2 trusts for sure. TRS does not deal with this kind of subtlety because its underlying trust jurisprudence is of the Janet and John variety.
The other stupidity is that the taxation position, where the issue may be of greater importance, has no bearing on the TRS point. Registering 2 may be wrong but HMRC will never spot it let alone be likely to do anything about it but on the LT’s death if you have registered one you would have a job “closing” half a trust and trying then to register 2 might make the trustees appear in default if HMRC, or by that time AI, query why they were not both registered some time before.
Jack Harper
OK. Registering two seems to be overkill given the registrations would be identical. Registering one seems to comply with the spirit of the legislation at least. Thanks for the response.
You need to register the life interest trust over half of the matrimonial home now. The second trust will need to be registered on the surviving spouse’s death as that is when it will come into force.
Am I missing something? My understanding is that the surviving spouse has, in substance, a life interest in the entire estate but that there are two different remainders. It is a matter of construction as to whether there are 2 separate trusts or 1 trust with 2 separate funds. I cannot see how a second trust could actually arise at a future date: whatever about the proper construction of the document, which I have not seen, any trust is, or any trusts are, created by the Will on the death of the deceased because the remainders are from then on vested in interest if not in possession.
My comment about the TRS is that the statutory instrument is too unsophisticated to cope with the fact that not every trust remains unitary in nature over its total duration. It completely ignores, for one thing, the wondrous changes that can be wrought by the future exercise of a power of appointment. The DT remainder will not come into operation until the LT dies but from the date of death it is a vested remainder either in a single separate trust out of 2 trusts or in part of the only trust. The questioner was clearly alert to this issue, which for trust law and taxation is not uncommon.
The concept of separate trusts or distinct funds of a single trust is often fiscally critical, not least for CGT. There is a panoply of case law delineating the concept and directing the tax consequences. See CG37800C to 37850. These contents emphasise that there may be an element of uncertainty of effect stemming from the proper construction of the specific drafting of the relevant documents.
The draftsman of the TRS statutory instrument was plainly oblivious to the existence or relevance of this juridical concept, adopting the unilluminated approach: “a trust is a bloomin’ trust, innit Guv?” It is hard to advise definitively on rules which fail to recognise the concept.
As a puritan and pedant, summa cum laude, I would come to a view on the point of construction based on trust law with a cross-check on how I would expect income tax, CGT and IHT to be applied after the LT’s death—-which may or may not nudge me in a given direction if there is intellectual wiggle room. Then I would document my view and my reasoning and for TRS register one or two trusts accordingly. It would not be my fault that those administering TRS have to cope with inadequate law and possibly their own inadequate understanding of trust law.
Jack Harper
No (you are not missing something).