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IHT and a life interest trust

Would this trust attract IHT when life tenant dies

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A life interest trust created by a Will came into being in 1993.  The sole life tenant has a substantial Free Estate and , with  aggregation of the Settled Estate , IHT would be in the frame.  However,  the six remaindermen are all recognised charities so , in these circumatances,  would the value of the Trust's Corpus Fund be exempt from IHT ?

The Trustees are anxious to have the position confirmed.

BFJ

 

 

Replies (5)

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By Montrose
25th Jan 2020 18:25

The vesting in charity of the trust assets on the death of the life tenant is treated as a transfer on death by the life tenant him[her]self and so exempt from IHT.

No IHT or CGT should be payable by the trustees

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By bfj
25th Jan 2020 22:07

Many thanks for the quick response

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By Tax Dragon
26th Jan 2020 08:04

Montrose loves answering questions that haven't been asked. Sometimes that's helpful; often it can be dangerous.

The IHT point is because it's to charity (HMRC's view - IHTM11101). That was the question.

The CGT point is because of the life tenant's death. Nothing to do with charity.

It's an important distinction, without which s reader might perceive there to be an advantage to surrendering the life interest during life.

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By bfj
26th Jan 2020 16:46

Any Answers has been of enormous help to me ( and I am sure many others) over the years and I have admired both the the knowledge of those answering problems and the clarity of their posts. It has been depressing , however, to see a minority bent on putting down others who have answered and making snide comments.
Does this approach make you feel better , Tax Dragon ? Apart from knocking Montrose, to whom I am grateful, you seem to have a very low opinion of the intelligence of the readership of Any Answers. I believe my query was clear and would have been recognised as pertaining to the DEATH of a life tenant only.
You really think, do you, that some readers of the posts would assume that Montrose ' s CGT comment was also relevant to a termination of the life tenancy not due to death ? Why , in that case, would I have referred to aggregation of Free and Settled Estates ? Am I supposed to post a thank you for your mini- lecture ?
Try laying off the snidery, TD.

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By Tax Dragon
26th Jan 2020 17:05

bfj wrote:

You really think, do you, that some readers of the posts would assume that Montrose ' s CGT comment was also relevant to a termination of the life tenancy not due to death ?

I would have, given that Montrose's previous sentence set the scene of a transfer by the life tenant to a charity. I would have, that is, if I hadn't known it was wrong.

So, whether you think me snide or stupid, that's your decision. I promise you I am not snide. I was in fact trying to be helpful.

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