IHT205 Form - Assets in a Trust

skipfeeney

Hi,

Please can someone assist with one of the questions on the IHT205 form. My mum and dad lived in separate houses (although still married) which they put into a family trust. My mum recently passed away and I am trying to complete the IHT205 form.

I am not sure what to put for the following question, the company that setup the trust has told me that the trust does not form part of her estate so not sure if I can just tick No?

Did the deceased have the right to receive the benefit
from any assets held in a trust that were treated as
part of their estate for Inheritance Tax purposes?
No Yes

If you answered ‘Yes’, and the deceased:
• was entitled to benefit from a single trust, and
• the value of the assets in that trust, treated as part
of their estate, was less than or equal to £150,000
include the value of the trust assets in box 9.3.
But if the value was more than £150,000, or there
was more than one trust, stop filling in this form.
You will need to fill in form IHT400 instead.

When i read the guidance it doesn't meet the criteria of Immediate post-death interest as the trust was created on its own, it wasn't setup under a will or intestacy.

Thanks

getmore4less

IPDI trusts are those set up on a death.

The trustees should know how to deal with the trust.

If they don't get a solicitor to look at it.

skipfeeney

Ok, unfortunately my elderly father is the other trustee and is refusing to pay for a solicitor. So i am trying to assist as much as i can.

As its not an IPDI I think its a no for that question then?

SeniorSam

The difficulty in asking questions on this forum is that usually, the question does not give sufficient information for answers to be given. There are different types of Trust and knowing what type of Trust it was may determine the answer. Also, the date that the Trust was created, by whom and who are Trustees and beneficiaries.

It is often thought that simply putting something in Trust will take it out of the estate. That is not so in most cases and this is why the date of the Trust is important.

In putting a residence into Trust, the settlor is making a gift, but if the settlor retains a benefit in that gift, then it will not leave the value of the estate.

Whoever set up the Trusts for your parents does not seem to have done a very good job in not making the process clear to the Settlor's , although time may have caused a loss of memory.

More information may help you, but the Revenue will be looking very closely at Trust matters, where so often they are not so straightforward.

Keep_pedalling

You definitely need legal advice, and not from the company who set this up. Unfortunately there are dodgy companies out there who push people into setting up expensive trusts in order to “protect” their homes from IHT and / or care fees.

Gifting your home to a trust and continuing to live in it does not take it out of IHT as it is a gift with reservation, and as far as care fees are concerned it is also likely to fail as it will be seen as a deliberate deprivation of assets.

You may find the house may also be subject to CGT when it is eventually sold.

Assuming you are the executor of your mother’s estate then regardless of what your father is saying there is nothing stopping taking your own legal advice on this, the cost of which goes down to estate expenses.

AnotherJoe

skipfeeney wrote: »

Ok, unfortunately my elderly father is the other trustee and is refusing to pay for a solicitor. So i am trying to assist as much as i can.

As its not an IPDI I think its a no for that question then?

Then tell him it's up to him to work out what to put and the consequences of getting it wrong could be tens of thousands of pounds maybe even hundreds of thousands depending on the size of the estate and it's down to him to fill it out with legal consequences for getting it wrong as well..... and you if you are taking responsibility.

This has all the hallmarks of a cheap decision in the first place compounded by dad and now your further cheap decisions.

skipfeeney

Ok thanks for the advice - i didn't realise I could charge it back to the estate.

What type of solicitor would I need? A probate solicitor?

AnotherJoe

skipfeeney wrote: »

Ok thanks for the advice - i didn't realise I could charge it back to the estate.
What type of solicitor would I need? A probate solicitor?

Sort of. One that specialises in trusts (who likely will also be involved in probate.

If memory serves there is even a designation for that, STEP I think.

xylophone

https://forums.moneysavingexpert.com/discussion/comment/75968166#Comment_75968166

The OP is an executor (not clear whether the sole executor) of his mother's will.

His mother and father lived apart (though still married) - it appears that they each gifted a property into the "Skip Feeney Trust" with the sole purpose of avoiding (could be seen as evading?) care home fees.

This immediately makes it a case of deliberate deprivation of assets and would almost certainly involve a challenge from the LA should means tested benefits be claimed.

https://www.carehome.co.uk/news/article.cfm/id/1591631/should-care-fees-home-trust

If the OP is the sole executor of the estate, then he alone is responsible for the information he provides to HMRC in respect of the circumstances of the deceased.

With regard to the Trust, it appears that there is now only one Trustee of the Trust (which is an unsatisfactory position) - the Trustee is responsible for the administration of that Trust.

The OP would be wise to take advice from a solicitor expert in wills and trusts ( that said, the information here about STEP and Stephen Long raises eyebrows)?

https://www.cii.co.uk/learning-index/articles/asset-protection-and-probate-trusts/68038

getmore4less

a key point in the above link.

What is a probate trust?

Before 22 March 2006 the type of trust called a “probate trust” had a uniform meaning. Typically, it would be a trust settled by an individual granting a life interest to himself, followed by flexible trust or discretionary trust provisions after his death. If the settlor was entitled to a life interest under the trust he had created, the transfer of assets to the trust would have been neutral for IHT purposes as the property would simply continue to be included in the estate of the settlor by virtue of his interest in possession and no transfer of value had taken place.

The 2006 date is significant because the rules changed on the IHT status of this sort of trust.


A key point many miss is the legal and beneficial ownership of property

A trust can takes the legal ownership out of the estate but the beneficial ownership can remain within an estate as it did with life interest trust and currently with IPDI trusts.

AnotherJoe

xylophone wrote: »

https://forums.moneysavingexpert.com/discussion/comment/75968166#Comment_75968166

The OP is an executor (not clear whether the sole executor) of his mother's will.

His mother and father lived apart (though still married) - it appears that they each gifted a property into the "Skip Feeney Trust" with the sole purpose of avoiding (could be seen as evading?) care home fees.

This immediately makes it a case of deliberate deprivation of assets and would almost certainly involve a challenge from the LA should means tested benefits be claimed.

Right, but that wouldnt seem to be an issue here, since the mother died and she didnt make any claim on care (AFAWK) so there has been no deprivation and they are seemingly looking to release the money to the father in which case theres no DOA happening for him either since the money will be part of his assets shoudl he claim care.
DOA might come into play later if fathers money ran out and he claimed his house which was put into the trust was not available to him.