IHT217 - or IHT400?

simonineaston

Hi folks, I thought the application for my father's probate would be straigtforward - after-all, I managed my mum's, but...
The background is nice and simple - my mum, who passed away in the autumn of 2015, left all her assets to my dad. During her lifetime, she was paid interest from a lump sum, left in trust for me by her father. When she passed, the trust fund came to me. I've applied to transfer her unused nil rate band, for use with dad's estate, and so I'm about to complete an IHT217. Q 13 in the 217 asks, "Did they (the first deceased) benefit from a trust during their lifetime?" As mum received interest from the money held in trust for me, I'm thinking that the answer should be Yes, but I see that means I'll have to stop and complete an IHT 400 instead, which looks like a nightmare!
Have I interpreted Q 13 correctly? And further to that, if I have to declare how much interest she received from the lump sum over her life-time, how on earth do I start - I have no idea?!
Any advice, or pointers will be appreciated.

getmore4less

if the trust was a life interest, was this treated properly as part of mum estate.

some trusts are counted as part of the estate of the life tenant

It may have used up some of the nil rate band,
If it exceeded £325k there may have been IHT to pay.

simonineaston

I think I see what you mean. I declared the value of the trust fund in section 9.3 of my mum's IHT205, Assets held in trust for the benefit of the deceased during their lifetime. It was nowhere near the nil rate band maximum, though. Do you think I'll have to complete the IHT400?

Owain_Moneysaver

There isn't actually much difference in the work required between the IHT205 or the IHT400 -- you still need all the paperwork and figures.

Set it all up on a spreadsheet rather than try and work with those ghastly PDF forms (where you can't save your work as you go along).

Was the interest paid to your mum for her benefit, or yours? You may need to refer to the wording of the trust. It's possible that she should have given you the interest! (and she wasn't a beneficiary).

Your mother's estate paperwork should have been kept by the Executor to that estate, as it's so recent. Or the trustees of the trust may still have records. Or knowing the value of assets in the trust fund and the interest paid from it for the last couple of years, you (or a solicitor's accountant) can extrapolate from that an estimate of lifetime income.

It may well be worth paying a few hundred pounds for a solicitor if this means you save tens of thousands of pounds in tax later.

simonineaston

As far as I can see, the key principal is this: does the trust fund count as part of my mum's estate or not? If the answer's Yes, then it must be deducted from the transferable nil rate band and if No, the transferable nil rate band stays at 100%. However the answer is in fact academic, as in either case, the combined nil rate bands will exceed the gross value of my father's estate.
Naturally enough, I want to make sure I complete the forms correctly in spite of the fact that it won't affect the outcome financially.

simonineaston

I didn't read your post, Owain, as I was typing mine!
I was the executor of mum's will, too and I haven't found any documents to do with the trust fund, other than the statements from the trustees (HSBC in this case...) and statements from her current account which show the quartlery interest payments. I think the best thing for me to do is ring the trustees and ask them for more info.
PS, you're right about those pdfs being ghastly - I got in a right tizz, filling them in for mum - and I work in IT support!!
BTW, I've just worked out from the relevant gov website that it was what's known as an interest in possession trust.

simonineaston

Here is an update regarding this issue - I hope it helps anyone else who has the same dilemma. I rang the government probate help desk this morning and here are the notes I took, immediately after the conversation.
Just to summarise the issue, Q13 in IHT217 asks, "Did the deceased benefit from a trust during their lifetime? If Yes, complete IHT400", whereas the guidance notes for IHT400 specifically state that one of the criteria for exceptional estates is benefit from, "a single trust with a value of less than £150,000"
Conversation with help desk, morning of Tuesday 18 April, between 11.10 and 11.20 am. approx.
After a wait of around 40 minutes, I spoke to a first line support person, who listened patiently to my Q.s (see above) and he told me he understood the Qs. His conclusion was that he should transfer me to a colleague who specialised in questions about trusts. He quickly did so and I summarised the position once more. The second agent also told me he agreed that there was a paradox and that he wanted to consult a third party - he agreed with me about the ambiguity between i) IHT217 Q13 and ii) the advice in the guidance notes for IHT400. He returned after consulting with a colleague and advised me that the ambiguity appeared intractable. His advice with respect to completing the application for transfer of nil rate band was to either a) answer No to Q13 and to submit IHT217, or else b) answer Yes to Q13 and to proceed to complete IHT400 (and any further forms associated with IHT400). He continued to point out that by choosing b) would mean the application for transfer of nil rate band would take a different route to choosing a), while the outcome with respect to the position regarding iht would be identical.
When I pointed out that I would feel uncomfortable answering No to Q13, when that answer was clearly untrue, at least when interpreted without regard to the guidance notes for IHT400, his advice was to repeat that the position re iht - at least in my particular circumstances - would not be reflected in any way that materially altered the legitimate outcome and added that the likelihood of the discrepancy being noticed was extremely slim!

As an aside, I would like to add that, apart from having to wait around 40 minutes for an agent to answer, the agents I talked to at the probate inheritance tax help desk (0300 123 1072) were civil and patient - and actually did help me make up my mind - surely the very definition of a "help line'! :-)

Owain_Moneysaver

We'll all be your witness :-)

Yorkshireman99

simonineaston wrote: »

Here is an update regarding this issue - I hope it helps anyone else who has the same dilemma. I rang the government probate help desk this morning and here are the notes I took, immediately after the conversation.
Just to summarise the issue, Q13 in IHT217 asks, "Did the deceased benefit from a trust during their lifetime? If Yes, complete IHT400", whereas the guidance notes for IHT400 specifically state that one of the criteria for exceptional estates is benefit from, "a single trust with a value of less than £150,000"
Conversation with help desk, morning of Tuesday 18 April, between 11.10 and 11.20 am. approx.
After a wait of around 40 minutes, I spoke to a first line support person, who listened patiently to my Q.s (see above) and he told me he understood the Qs. His conclusion was that he should transfer me to a colleague who specialised in questions about trusts. He quickly did so and I summarised the position once more. The second agent also told me he agreed that there was a paradox and that he wanted to consult a third party - he agreed with me about the ambiguity between i) IHT217 Q13 and ii) the advice in the guidance notes for IHT400. He returned after consulting with a colleague and advised me that the ambiguity appeared intractable. His advice with respect to completing the application for transfer of nil rate band was to either a) answer No to Q13 and to submit IHT217, or else b) answer Yes to Q13 and to proceed to complete IHT400 (and any further forms associated with IHT400). He continued to point out that by choosing b) would mean the application for transfer of nil rate band would take a different route to choosing a), while the outcome with respect to the position regarding iht would be identical.
When I pointed out that I would feel uncomfortable answering No to Q13, when that answer was clearly untrue, at least when interpreted without regard to the guidance notes for IHT400, his advice was to repeat that the position re iht - at least in my particular circumstances - would not be reflected in any way that materially altered the legitimate outcome and added that the likelihood of the discrepancy being noticed was extremely slim!

As an aside, I would like to add that, apart from having to wait around 40 minutes for an agent to answer, the agents I talked to at the probate inheritance tax help desk (0300 123 1072) were civil and patient - and actually did help me make up my mind - surely the very definition of a "help line'! :-)

I hope you recorded the call. Also I would enclose a covering letter setting out the substance of the conversation when you submit the application.

DorsetLad

Owain said: "Set it all up on a spreadsheet rather than try and work with those ghastly PDF forms (where you can't save your work as you go along)."

I agree that it's a good idea to set up a spreadsheet initially, but I had no problem with the IHT pdfs. I downloaded them all to my PC and filled them in over several weeks, whenever the information needed became available, I saved them after each update I made.

simonineaston

Hooray - probate has been granted! Thanks for input, everybody. :-)