H&W wills contain the usual, albeit perhaps now obsolete(depending on your view!) NRB Discretionary Trust. H dies (just over 2 years ago) and his will is unadministered (as is so often the case). W now dies - she has, of course de facto treated everything as hers - though house is a tenancy-in-common. I say the first will remains relevant and the trust should be set up and administered. Clients have advice elsewhere which says as the trust was never set up the full TNRB will be available - so implying the NRB trust in the first will can be ignored. Who is right ?
You are. The trust has to be dealt with
The court would enforce the establishment of the trust at the instance of any beneficiary; it must follow (equity regards as done that which ought to be done) that it must now be established and administered, even if an immediate and complete distribution is the intended outcome.
I think it depends on the actual facts. In some cases, you will be able to say that the trustees decided everything should go to widow, but they failed to record that decision. In that case the TNRB should be available. But we had a case in the office recently where the widower and children were appointed executors and trustees, but the children took no part in the administration of the estate. In this case it was impossible to say that they had made a decision with regard to the trust. We decided the correct thing was to treat sums due to the trust from the wife’s estate as still being due, thus reducing the widower’s estate by an amount equal to the NRB for IHT purposes. This seems to have been successful, but it did impact on the RNRB which we have not been able to claim in full. We will obviously have to wind up the trust in due course.
Even if they have genuinely made a decision to wind the trust up upon the first death, most (but not all)powers of appointment must be executed by deed to be effective.
Mishcon de Reya LLP
A colleague of mine recently had a similar situation. She returned an unpaid legacy of the NRB in force at the date of death of the first spouse on the Inheritance Tax Account of the second spouse. This was accepted by HMRC.
The legacy was then paid to the Trustees of the Will of the first spouse which they distributed to the beneficiary.
Has anyone considered and explained the potential value of the discretionary trusts to the heirs of H&W? May be there is a good case for setting up the Trusts in both Wills.
MJC Consulting (Herts) Ltd
I have a discretionary trust with the typical overriding powers, in particular the power of appointment. I intend to use the power of appointment to exclude a beneficiary from the list of potential beneficiaries. Unfortunately I do not have an express power to exclude beneficiaries. It is important that I do not re-settle the Trust Fund. The Trust is to stay as is, but without the unwanted beneficiary. Can anyone recommend a precedent that they have used?
Practical Trust Precedents has a good precedent for this, but I’m going from recollection and I can’t remember whether it is appropriate only really where the trust has an express power. Although it would be as well to refer in the document to the clause of the Trust you rely on when making the exclusion, so perhaps that doesn’t matter.
Julian Cohen, Solicitor