Before commenting, it would be useful to know if the original income beneficiaries were given an entitlement to a one-third share of the income, or the income of a one-third share of the trust fund.
If the former, amongst other aspects, the IHT liability comes out of the entire fund and the income continues to be divided into thirds.
If the latter, the IHT liability comes only out of the deceased income beneficiary’s “share”, the other 2 beneficiary’s shares being unaffected.
This also has implications for CGT, and how this might be dealt with.
Paul Saunders