Vulnerable Person's Trust

Trusts Discussion
1

My client has an estate of £2,500,000 which is all held in one property. It is the client’s main residence, however, many of the rooms are let, providing substantial income for the client. She has a disabled adult child who she wishes to cater for. Life assurance to cover any inheritance tax is not an option. The client would like to gift part of the property to a vulnerable person’s trust but would remain living in the property herself. Is there any way of setting this up to make it effective for reducing IHT (as well as genuinely protecting the beneficiary’s share), given the mix between residential and commercial.

If this is possible (I appreciate other taxes are involved) I do not set up lifetime trusts and am looking for someone who specialises in this type of advice, particularly with complex cases where high net worth clients have business assets (not qualifying as a trading company for business property relief) mixed closely in with residential assets. Ideally I would like someone to refer these cases to.

Thank you very much in advance for any help.

Nikki Hobbs
Respect Wills

3

S.102B(4)(a) Finance Act 1986 may assist since both the settlor and the child will be in occupation. Since the donee is actually a trust rather than the child, this would need to be carefully considered to make sure this sub-section applies. My instinct is that, since the child would have a qualifying interest in possession, the child would be treated as the donee for IHT purposes.
If the child ever ceased to occupy the property, from that time on the settlor would be treated as reserving a benefit in the gift.

Tobias Gleed-Owen
Birketts