I have a client who made a PET 4 years ago above the NR band. They are now considering establishing a trust. I am already aware they can use the full nil rate band when calculating if any lifetime IHT is due, as you only need to look at chargeable transfers made in the last 7 years, and PETs arent chargeable transfers. However what would be the position if they die within the next three years? Would the NRB on death be used first against the PETs (but taper relief due on the amount of tax charged) meaning none would be available against the CLT so IHT at 40% would be due on the whole amount transferred to trust?
I have read that the 7 year clock is effectively reset on PETs within the last seven years when a CLT is made - does this mean the client has to survive 7 years from the date of the CLT for no IHT to be due on them?
Thanks in advance