I’m dealing with an estate where the deceased left up to £300k in a NRBDT and residue to spouse.
The trustees (son and daughter of the deceased and the only other potential beneficiaries under the Trust) wish to appoint out all assets to surviving spouse and so end the Trust.
My problem is that the deceased did not have assets of up to £300k available to her at the date of death. She held savings and investments totalling £175k in her sole name. The only other asset is the deceased’s inheritance from her late Mother’s estate (there are apparently issues relating to a property which are as yet unresolved and it may be some years before the inheritance of approx £170k is paid to the deceased’s estate).
My question is whether I can include £125k of the expected inheritance as an asset to be appointed out of the NRBDT (so that assets to the value of £300k are appointed to surviving spouse) or should I simply assume that as only £175k is available now to form part of the NRBDT , I may only appoint out £175k.
I am so confused!
Your guidance would be much appreciated, thank you.
I believe it would be sufficient to appoint out the entire NRB trust, rather than try to identify the individual assets that might comprise it, or their value. That way the surviving spouse will receive whatever the trustees might have been entitled to from the estate.
Provided the personal representatives of the late mother’s estate are appropriately notified that the surviving spouse is, in the event, entitled to the whole of the deceased’s estate the PRs should then account to them, rather than the executors of the deceased’s estate.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I was hoping this would be an appropriate way to proceed.
Much appreciated, thank you
This is a drafting exercise and the desired result can be achieved by a form of words that will include the remainder of the NRBDT
I agree with the other posts that appointing the entire fund (without restricting the appointment to specific assets) is usually the simplest and best solution.
The acquisition cost for CGT of the property inherited from mother will be its market (probate) value at the date of mother’s death.
An appointment of the property out of the NRBDT under s144 IHTA 1984 within two years of death of the deceased will be automatically read back for IHT, but not CGT.
For the appointee the base cost for CGT of the property will be the market (probate) value at the date of the mother’s death if at the time of the appointment the estate remains in administration (as the appointee will take qua legatee). If the deceased’s estate has been administered at the date of the appointment, the base cost for CGT will then be the value of the property at the date of the appointment (which will presumably be higher if the property’s value has appreciated). In the latter case a CGT charge may arise on the part of the trustees with no CGT hold-over relief possible.
If an appointment out of the trust takes place after two years s144 will not be in point in which case there will be no reading back for IHT and an exit charge will in principle arise. The appointee’s base cost for CGT will be market value at the date of the appointment. A CGT charge will arise on the part of the trustees but subject to CGT hold-over relief under TCGA 1992 s260.
Have the son & daughter considered the benefits to themselves of retaining the Trust? They could fomalise the Trust and then make a loan of the Trusts assets to the surviving spouse. At least that way, the assets of the Trust are not exposed to care fees in the hands of the surviving spouse.