Unadministered NRBDT

Trusts Discussion
1

Deceased died 4 years ago with his only assets being ½ share of property, some shares and a vehicle. All well below the NRB. Within the two-year period the family formally transferred the shares and car to the surviving spouse but did nothing with the property because they didn’t realise anything needed to be done.

It is now outside the two year period to ‘write back’ for IHT/CGT purposes. My view is the grant needs obtaining and the ½ share of the property being dealt with. If, when the grant gets issued, the surviving spouse gives an IOU to the trust in respective of the value of the deceased’s share of the property and the debt secured on the property it will trigger a stamp duty return obligation. So, I am querying when ‘substantial performance’ would have deemed to have taken effect for the purposes of the stamp duty return.

If it is regarded when the debt agreement is entered into it is below the threshold for the Stamp Duty thanks to the current Stamp Duty holiday window, so no stamp duty payable and no late return being filed because it would be done the same time as the debt agreement.

However, would HMRC regard ‘substantial performance’ has having taken place at an earlier date? (making fines/penalties for late filing and no stamp duty holiday being applicable).

The surviving spouse is entitled to occupy the property under a different interest (that as co-owner [SDLTM07900]) and therefore has been in occupation throughout, so I am wondering if could it be successfully argued that there has been no change to her status/occupation throughout and the substantial performance only took effect when the Grant has been obtained and Debt agreement entered into?

Just wondering if I am overthinking it or if there is an obvious elephant in the room that I am missing?

2

Elizabeth
You do not say what the will/intestacy provisions are, but so far as the property is concerned remember that you are not dealing with a legal estate so may not need a legal grant.
It seems that the surviving spouse is the surviving trustee of land, so can appoint anyone of his/her choice to act as co-trustee if/when required [eg to sell], and those trustees [of land] are then responsible to account appropriately to the intended beneficiary/ies. I could not follow your reference to SDLTM but this seems to agree, following ToLATA.
Obviously matters depend on the individual circumstances of each case, in particular the value involved and whether professional/independent PRs/trustees are concerned - but if family members are prepared to take responsibility [duly advised of any potential risks] it may be that they can effect the best pragmatic solution without involving any sledgehammer?
Kevin

3

Thanks Kelvin,
The family are keen to retain the trust structure as that protects half of the house proceeds from care fees should that situation arise. If it had been dealt with within two years of death I’d have appointed it out to a flexible life interest trust for the surviving spouse and preserved the available IHT allowances. It’s the passage of time, the lack of be able to write back for IHT/CGT issues that have been vexing me, but I’m conscious that if I do the IOU/debt route, the trust might then get clobbered with stamp duty and there’s no cash available to pay it. It’s the shame the family didn’t seek to act within the two year period.