Discretionary Will Trust

Palacedolly

In the newsletter of 9/1/24 Martin says that if you have a DWT then children or grandchildren can't benefit from the extra £175k inheritance tax relief. Is that correct?  Others give different advice in that if a property is sold within 2 years it does apply.  Anyone know the definitive?

Keep_pedalling

Putting the home in a DWT will lose the RNRB, if however within 2 years of death there is an appointment of the trust assets by the trustees to a direct descendant, then it would be treated for IHT purposes as if the assets had been left to the direct descendant outright (S144 IHTA 1984). In that event, the RNRB would be available as the direct descendant is treated as if he/she had inherited the property on death.

Relying on the trustees sorting this out is risky, but the big question is why would you put it in a DWT in the first place?

Marcon

Palacedolly said:

In the newsletter of 9/1/24 Martin says that if you have a DWT then children or grandchildren can't benefit from the extra £175k inheritance tax relief. Is that correct?  Others give different advice in that if a property is sold within 2 years it does apply.  Anyone know the definitive?

Good clear and up to date explanation here: https://techzone.abrdn.com/public/iht-est-plan/residence-nil-rate-band-guide#anchor_5

Palacedolly

Thank you both, Keep pedalling, I was persuaded by a reputable company to have a DWT to protect my chldren so only they benefit and not specifically spouses, also to ensure that gifts to others were given when they were ole enough or responsible enough to have a specific amount of money.  Sounds like I have made it difficult for them? 

Malthusian

Palacedolly said:

Sounds like I have made it difficult for them? 

Yes, because that is what discretionary trusts are for. In this case you make it more difficult for your children to get your money until they divorce those grasping spouses you apparently don't like. As a bonus, a much larger share goes to that person we all love and trust instinctively - the taxman. 

Keep_pedalling

Palacedolly said:

Thank you both, Keep pedalling, I was persuaded by a reputable company to have a DWT to protect my chldren so only they benefit and not specifically spouses, also to ensure that gifts to others were given when they were ole enough or responsible enough to have a specific amount of money.  Sounds like I have made it difficult for them? 

You could always make a new will. Trying to control you assets after you have gone is really a pointless exercise, you children could equally benefit from their spouses inheriting from their parents. 

A lot of will writers love to upsell trusts as it earns them fatter fees.