testator left a will leaving her property (£600k value) on life interest for her sister. Sister is 78. Sister is a spinster and has her own home and £100kish in cash.
Terms of iip trust are -
i. sister has IIp during her lifetime (property has been sold)
ii. after death of sister the trust falls into residue.
iii. residue divided 5 ways equally on following basis:-
a. to CB absolutely and if she fails to obtain a vested interest leavng issue…. CB has a five year old child.
b. to TP absolutely and if she fails to obtain a vested interest leavng issue…
c. to DB absolutley on same basis as a and b
d. to PM absolutely and if PM DIES BEFORE ME or survives me but fails to take a vested interest, then his share passes to a b and c equally
e… same wording for additional beneficiary.
The trustees and beneficiaries have been discussing a variation of the will by the life tenant on the basis of an actuarial report which has valued her interest at a capital value of £175,000. They have been discussing the life tenant varying her interest to a lump sum of £175k with the balance falling into residue.
The will trust clause contains a power for the trustees to raise and pay capital to or for the benefit of the life tenant but no overriding power of appointment in favour of other beneficiaries.
- Can the life tenant execute a deed of variation giving up her life interest but retaining £175,000 of capital. If this is possible does it need the residuary beneficiaries to be party to that deed?
- If tis is not possible, is it possible for this to be achieved by a Deed of Partition between the life tenant and the remaindermen? If so it is assumed this will constitute a PET. Assumed that £325,000 of the deemed PET would use her allowance and the balance of £100k or so would be taxable under the usual IIP rules
- Does the fact that all five residuary beneficiaries survived the deceased mean that their interest have vested or do we have to be concerned about the fact that there are issue of some of the beneficiaries who are under 18?
Heath Square Private Client Limited