AARRGGHH!!!! IHT, CGT & Income Tax. Triple whammy????!!!!!!

RobS77

wise_fool wrote: »

Before you start throwing money at lawyers and getting contentious, you need to get all the facts together so you can get the issue clear in your head. If you are prepared to furnish us with a few more facts/clarification there are experienced people on this forum that may be able to help you with this.

I am slightly unclear about what was in his estate when he died. The way I read it is you have included in your total of 650k the jointly owned boat worth 80k and the 90k in the joint bank account?

A life policy written into trust for the benefit of his girlfriend can be disregarded for IHT purposes.

You will also need to let us know whether your father made any gifts in the 7 years prior to his death - for example when did your father repay the girlfriend's mortgage and pay for the refurbishment on her flat? Also were there any debts?

For the issue of Capital Gains Tax you will need to know what the value of the holiday home was when it was placed into trust? Also, for completeness if you have it, the total cost of any improvements made since then. I don't think 'holdover relief' was available until 1992 so I assume your father would have paid Capital Gains Tax when the property was placed into trust - you might like to double check that point.

Who are the executors in the 1996 will and who are the trustees of the discretionary trust?

Once we are in a position to work out how much and where any inheritance tax liability arises then you can consider what to do with the girlfriend. Negotiation is key here. Although you want to honour your father's wishes and provide her with a roof over her head, you will need to take into account her own financial position.

Remember, your father has effectively given her an 80k boat and 90k in the bank account since drawing up that last, unsigned will in 2007. There's also the 100k life policy and the flat he partially or wholly paid for and renovated, so she isn't exactly destitute.

You will need to weigh it all up along with your own needs. Has there been any discussion with her about this? What are her expectations - is she prepared to go or is she digging her heels in? What is your relationship with her like? Has she instructed solicitors?



The OP has already stated that he was divorced and it was a discretionary trust - presumably set up to minimise IHT. Discretionary trusts aren't able to grant life interests (as they would then become interest in possession trusts which are entirely different) and in any case the father would almost certainly not have been a potential beneficiary otherwise it would have defeated the whole point of the trust.

Generally when people continue to benefit from an asset after making a gift of it, it becomes known as a Gift with a Reservation of Benefit (GROB) and it is added back into their estate for IHT purposes - unless they paid a full market rent until their death. I will return to this subject in due course.

In the meantime don't worry too much - things may not be quite as bad as you fear.

Erm, not actually true regarding the fact that you can't have a life interest under a dicretionary trust- have you ever heard about a irrevocable (or indeed revocable) life interest?

The Trustees can appoint out a life interest if they so wish from a discretionary trust.

RobS77

wise_fool wrote: »

Perhaps you should flatter yourself a little less as I'm not sure you are as competent as you think. A deed of variation can only vary the will or intestacy. The property that the girlfriend is occupying is not part of the estate as it was gifted to a discretionary trust 20 years ago and so cannot be varied.

Erm no a post based on a very quick skim of another persons post at the end of a very long week is always going to be rather rushed: I take your point though, I didn't read the post in much detail, it was very simply a generic summary of points which sprung into my mind which I thought might be helpful to the poster in question. As you will appreciate there is a world of difference from formally taking instructions from a client, having the full facts in front of you, and giving some generic advice. Frankly, if you are trying to get advice for free on an internet forum, you take your chance accordingly.

Interesting point regarding variation of trusts: there is normally a power contained in the administrative powers to vary is their not? Or if not, surely it is possible to go to court varying the same?

wise_fool

RobS77 wrote: »

Interesting point regarding variation of trusts: there is normally a power contained in the administrative powers to vary is their not? Or if not, surely it is possible to go to court varying the same?

You and your 'administrative powers'. Hypothetically the beneficiaries of the trust could agree to bring it to an end - but why should they? - And in any case that option may not be available as there may be minors (ie grandchildren) that are potential beneficiaries. In addition, A court would be very reluctant to interfere with a trust that was set up 20 years ago.

RobS77 wrote: »

Erm no a post based on a very quick skim of another persons post at the end of a very long week is always going to be rather rushed: I take your point though, I didn't read the post in much detail, it was very simply a generic summary of points which sprung into my mind which I thought might be helpful to the poster in question. As you will appreciate there is a world of difference from formally taking instructions from a client, having the full facts in front of you, and giving some generic advice. Frankly, if you are trying to get advice for free on an internet forum, you take your chance accordingly.

There are plenty of reliable posters on this forum who give up their valuable time to help others - and it is quite often an invaluable resource to many who often don't have the resources to pay out for professional advice.

There are of course many unreliable posters whose 'advice' and moralising should be taken with a pinch of salt. But I think if you are to offer your 'advice' to people on an internet forum it shows good manners to either read the post properly and respond accordingly or to not bother at all.

And just because you are not charging [FONT=&quot]£200 an hour for your 'expertise' I don't think that entitles you to shrug your shoulders and say 'well, what do you expect for nothing' as that's not really in the spirit of 'helping' others less fortunate than ourselves - and [/FONT][FONT=&quot] I find that attitude quite arrogant, frankly. [/FONT][FONT=&quot]As a solicitor I trust you will be familiar with the term 'pro bono'?
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