Post Death Interest Trust

Archiedextrous56

Good afternoon everyone, I thought I would just continue this thread as it relates to the ongoing timeline of the same topic and would appreciate some thoughts about next steps. The IPDI Trust remains in place after we took advice from a STEP qualified solicitor. The Trust was registered post 2 years of death and a Restriction A placed on property at LR. We are now way past the 2 year period and the Widow has expressed a wish to downsize property but has stated that he does not need the 50% share left in the Trust to fund it. Presumably he will be funding it from elsewhere or getting help from family. The Will obviously gives him a right to downsize and reside at the new property for life. However he wants to terminate the Trust and find a new property himself. What are the tax and legal implications?

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82127559#Comment_82127559

If you are saying the widower is now prepared to walk away entirely from the 50% value of the house he is entitled to occupy under the terms of the trust, then his generosity in doing so will give rise to a potentially exempt transfer for IHT purposes equal to the 50% house value he is giving away.

The implication on is own estate, is that he will have used part of his nil rate band and if he fails to survive the requisite 7 years after the 'gift', then the beneficiaries of his own estate may suffer the consequential IHT on his estate if it is large enough.

There are no other tax implications, so if he is prepared to be that generous that really would be a win win for the remaindermen, at the potential expense ( in the medium term) of the widower's immediate family.

Given as you say he is perfectly entitled to a share of the house proceeds rolled into his proposed downsized property, is he really that generous or is the trust termination he is suggesting based on him getting a share of the 50% proceeds ? If so, on what basis is that share being calculated?

Archiedextrous56

Thank you for those insights Poseidon1, very useful. I need to get some more factual detail but will post back here for comment.