H dies in 2018 leaving legacy to NRBDT and residue on life interest for W and then on her death to a DT.
W dies in 2021 leaving her estate to a DT.
Are there three RPTs or two please? I’m thinking two.
H is the settlor of NRBDT legacy.
W is the settlor of DT established by her Will with her estate AND she is the settlor of H’s residue (that was previously subject to the IPDI). Have I got this second bit right in bold?
If two RPTs, two lots of TYAs and exit charges. When does the wife’s DT start though for TYAs? I believe there is the same start date for both and that is date of husband’s death.
Would be most grateful for any feedback. I imagine this is fairly common will drafting for many of you.
Then I’m thinking only one on second death because only one settlor - wife - and they are created on same day- wife’s death. Wife is clearly settlor of her own estate passing into DT but as life tenant of husband’s residue she is also settlor of that. So is she settlor of the whole estate on second death (bar the NRBDT trust fund)? So only two trusts overall? Is start date for purposes of TYA date of husband’s death?
I quote from the Inheritance Tax Planning Handbook-
“Suppose Mr Jenkins died in 2011 creating a DT over part of his estate and a life interest for his widow over the rest. Mrs Jenkins died in 2018 and under the terms of her husband’s will, the residue was then added to the other trust in the Will. All of it continues to be held on discretionary trusts.
This is treated as two separate settlements: one made by Mr Jenkins in 2011 and one by Mrs Jenkins when she died. However the TYAs for both trusts are dated from Mr Jenkins’s death in 2011 and there will be a 10 year charge on both in 2021.”
What happens to the further trust created on Mrs Jenkins’ death with her estate that she too leaves to a DT. Does it merge with the trust applying to Mr Jenkins’ residue?
There are three, although one starts off as an IPDI trust. The curiosity of this trust is that under s.80 IHTA W is regarded as the settlor of the RPT that follows the IPDI but the commencement date for calculating TYAs is nonetheless the date of H’s death. The result of this is that it is not a related settlement with W’s will trust RPT.
I don’t think that’s correct. I had always assumed in a case like this, that there are three RPT trusts:
Trust 1 - The NRBDT created in H’s Will
Trust 2 - The IPDI created in H’s Will which converts to a DT on W’s death
Trust 3 - The DT created under W’s Will
Trusts 2 and 3 are treated as being related settlements for the calculation of exit charges, but as far as the principal charge is concerned for Trust 2, this is the date of husband’s death, so relief is available for the period it was not a RPT.
My understanding was based on IHTM42231: ‘if the deemed settlement commences on a death then other settlements made by the deceased, e.g. by will, may be related settlements or be treated as same-day additions.’ (The deemed settlement being T2.)
The rule (IHTA/S80) is that when neither of the persons above have a QIIP then for the purposes of relevant property charges
any continuing settlement is a separate settlement that is deemed to commence at that later time and
the settlor is the last of those persons to have a QIIP.
So my understanding is that for T2, wife is the settlor and it is deemed to commence on her passing.
It then goes on to say: ‘if the deemed settlement commences on a death then other settlements made by the deceased, e.g. by will, may be related settlements or be treated as same-day additions’
So as T3 is also created on W’s death, it is related to T2 (as T2 is deemed to start at her passing).
It then further states: ‘However, the date of the anniversary charge is not affected. It is still determined by the 10-year cycle based on the first settlement.’
So based on this para, clearly a distinction between the date of the 10 year charge and the actual calculation of RPT charges.
If they are not related, then I still struggle to see how 3 NRBs would be available…..however I stand to be corrected!
Start date of trust 2 is W’s death but TYA calculated from date of H’s death confusingly.
This is such a minefield. I just put John Bunker on the spot by asking him the question following his live presentation. He said Trust 2 and 3 not related.
Yet at the end of the day we’ve now got two Trusts created by the same settlor -W- and on the same day. Jack’s point is that because start date for calculating TYAs on Trust 2 is H’S death and not W’s means Trust 2 and 3 not related.
