Valuation of Index-Linked Legal Charge for IHT

What is the Market Value of an Index-Linked Legal Charge on the 10-year IHT anniversary (Disc Trust)

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Discretionary trustees have two assets within the Trust namely a small amount of cash at bank plus a larger index-linked legal charge against the home of the recently deceased main trust beneficiary.

The legal charge started at £225,000 plus RPI to date of repayment. At the recent 10-year anniversary (before the beneficiary died) the £225,000 legal charge RPI indexed up to £340,000. But what value to include on the 10-year IHT return. If it is market value, is that £340,000, the indexed amount, or is there another formula to use. I cannot imagine that someone would pay a full £340,000 to buy a legal charge if they had to sit on their investment and wait until the property was sold. The beneficiary was about 90 years old and in poor health.

The house will now be sold and split between the two remaining trustees who are trust beneficiaries and children of the deceased main trust beneficiary.





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