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Discretionary trust - IHT and charities

Discretionary trust - IHT and charities

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I have a will trust established 5 years ago.  The inital asset was £600,000 cash.  The trustees now want to distribute all assets to 50% charity and 50% individual beneficiaries.  As the assets to the charity are non-relevant property, I think it should be £600,000 less charity exemption £300,000 = £300,000 chargeable less nil rate band £325,000, so no IHT exit charge on the assets to the individual beneficiaries.  

However, someone has suggested that it should be £600,000 less nil rate band £325,000 = £275,000 chargeable assets.  So, IHT at 20%, £55,000, effective rate = 9.166%, actual rate 30%x 20/40 quarters = 1.375%.  IHT exit charge to charity would be £300,000 less charity exemption = £0 but individual beneficiaries would be £300,000 x 1.375% = £4125.  Similar to how BPR/APR is applied in the first 10 years.  

 

Thank you in advance.

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10th Jun 2019 15:26

The answer to your question is "neither". There will be an exit charge on the sums payable to the individuals based on the effective IHT rate applying at the death and the fraction based on IHTA s68 [4].
There should be no charge on the sum payable to the charity.

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10th Jun 2019 15:26

The answer to your question is "neither". There will be an exit charge on the sums payable to the individuals based on the effective IHT rate applying at the death and the fraction based on IHTA s68 [4].
There should be no charge on the sum payable to the charity.

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10th Jun 2019 20:03

The effective IHT rate at death was nil due to the NRB and the TNRB applying. The £600,000 went into the will trust without having paid any death IHT.

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