Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 6th Dec 17, 7:37 AM
    • 481Posts
    • 46Thanks
    nxdmsandkaskdjaqd
    IHT implications = Trust
    • #1
    • 6th Dec 17, 7:37 AM
    IHT implications = Trust 6th Dec 17 at 7:37 AM
    I am wishing to understand the rules and implications of establishing a Trust within a will and any IHT implications. So have a hypothetical scenario:

    Husband and wife with only one residence of value £1,000,000, set-up as Tenants in Common. Tenants in Common and Wills set up and signed in 2017

    Joint Wills with the Trust leaving the prevailing Nil-Rate Band (currently £325K) of the house to the only child.

    NOTE: I understand that the Nil-Rate Band is only applicable, as the New Residence Nil Rate Band (RNRB) of £175,000 by 2020 does not apply, as a Will that relies on such a trust will not qualify for the RNRB because the beneficiary is a trust, not a child.

    The husband dies in tax year 2020 to 2021, resulting in the house being structured as per the Will (32.5% to the only child and the remaining 67.5% to his wife).

    With the above hypothetical scenario, is there any IHT liability with leaving the 32.5% to the only child?

    I believe the Trust referred to above is called “Life Interest Trust also known as an Interest in Possession Trust” is that correct?

    I appreciate that the advice of a solicitor is required, but I need to establish in my own mind some of the possible implications.
Page 1
    • getmore4less
    • By getmore4less 6th Dec 17, 9:43 AM
    • 30,837 Posts
    • 18,444 Thanks
    getmore4less
    • #2
    • 6th Dec 17, 9:43 AM
    • #2
    • 6th Dec 17, 9:43 AM
    you are talking about an immediate post death interest in possession trust. (IPDI is what you google, loads of example on how they work.).


    Basically the IHT and CGT position on those is as if the house was inherited by the survivor with the life interest, if a spouse they keep the transferable nil rate band and can still use both RNRB.
    Last edited by getmore4less; 06-12-2017 at 11:45 AM.
    • Yorkshireman99
    • By Yorkshireman99 6th Dec 17, 11:17 AM
    • 3,379 Posts
    • 2,748 Thanks
    Yorkshireman99
    • #3
    • 6th Dec 17, 11:17 AM
    • #3
    • 6th Dec 17, 11:17 AM
    I am wishing to understand the rules and implications of establishing a Trust within a will and any IHT implications. So have a hypothetical scenario:

    Husband and wife with only one residence of value £1,000,000, set-up as Tenants in Common. Tenants in Common and Wills set up and signed in 2017

    Joint Wills with the Trust leaving the prevailing Nil-Rate Band (currently £325K) of the house to the only child.

    NOTE: I understand that the Nil-Rate Band is only applicable, as the New Residence Nil Rate Band (RNRB) of £175,000 by 2020 does not apply, as a Will that relies on such a trust will not qualify for the RNRB because the beneficiary is a trust, not a child.

    The husband dies in tax year 2020 to 2021, resulting in the house being structured as per the Will (32.5% to the only child and the remaining 67.5% to his wife).

    With the above hypothetical scenario, is there any IHT liability with leaving the 32.5% to the only child?

    I believe the Trust referred to above is called “Life Interest Trust also known as an Interest in Possession Trust” is that correct?

    I appreciate that the advice of a solicitor is required, but I need to establish in my own mind some of the possible implications.
    Originally posted by nxdmsandkaskdjaqd
    You need an IHT and trust specialist not a run of the mill solicitor. Find a solicitor who is a STEP member who will know much more.
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 7th Dec 17, 8:05 AM
    • 481 Posts
    • 46 Thanks
    nxdmsandkaskdjaqd
    • #4
    • 7th Dec 17, 8:05 AM
    • #4
    • 7th Dec 17, 8:05 AM
    Thanks, yes I was aware of STEP and have a local company who is a member.

    So based on my readings of IPDI trusts and my above hypothetical scenario, no IHT is due until the death of the second partner.
    • Keep pedalling
    • By Keep pedalling 7th Dec 17, 9:32 AM
    • 4,103 Posts
    • 4,466 Thanks
    Keep pedalling
    • #5
    • 7th Dec 17, 9:32 AM
    • #5
    • 7th Dec 17, 9:32 AM
    I thought the sort of trust you are talking about became obsolete for married couple when the transferable nil rate band came in.

    The usual reason for using tenants in common is to protect half the house from being gobbled up in care costs for the surviving spouse, but that is not really nessasary on a property of this high value, so why complicate things?

    Are there substantial liquid assets that would currently fall into the estate?
    • nxdmsandkaskdjaqd
    • By nxdmsandkaskdjaqd 8th Dec 17, 9:10 AM
    • 481 Posts
    • 46 Thanks
    nxdmsandkaskdjaqd
    • #6
    • 8th Dec 17, 9:10 AM
    • #6
    • 8th Dec 17, 9:10 AM
    The usual reason for using tenants in common is to protect half the house from being gobbled up in care costs for the surviving spouse, but that is not really nessasary on a property of this high value, so why complicate things?

    Are there substantial liquid assets that would currently fall into the estate?
    Originally posted by Keep pedalling
    This is not being considered for Care Home implications, but protecting my son should the wife remarry.

    There are other assets, pensions, ISA, cash, etc.

    Do you have another possible solution?
    • Keep pedalling
    • By Keep pedalling 8th Dec 17, 10:46 AM
    • 4,103 Posts
    • 4,466 Thanks
    Keep pedalling
    • #7
    • 8th Dec 17, 10:46 AM
    • #7
    • 8th Dec 17, 10:46 AM
    This is not being considered for Care Home implications, but protecting my son should the wife remarry.

    There are other assets, pensions, ISA, cash, etc.

    Do you have another possible solution?
    Originally posted by nxdmsandkaskdjaqd
    With an estate this size, and the slightly complex family setup, the only option is to to take good professional advice.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,720Posts Today

5,970Users online

Martin's Twitter
  • RT @bearface83: @MartinSLewis check out the @Missguided new 60% off offer. Upping the cost of items almost double to make us think it?s a?

  • RT @efitzpat: Thank you SO SO much @MartinSLewis for your Student Loans refund advice! I just got a grand refunded right before Xmas! Whoop?

  • Have a lovely weekend folks. Don't do anything (fiscally) that I wouldn't do!

  • Follow Martin