RNRB – What to do with Wills ……
…containing IPDI trust in favour of spouse; remainder on discretionary trust?
In discussing what approach to take when reviewing old Wills for the purposes of achieving the RNRB and TRNRB on the surviving spouse/civil partner’s death concern was expressed about a common form of Will:
Alec & Barbara being married with adult children and grandchildren made mirror Wills leaving their respective estates to each other on IPDI with the remainder interests on discretionary trusts for a wide class of beneficiaries including all their children and grandchildren.
If Alec died before 6 April 2017 he would not have used his RNRB by the use of this Will and it will in principle be available for carry forward, subject to taper threshold limits.
If Barbara was now to die the discretionary trust for children and grandchildren will not be a type of settlement which will secure Barbara’s RNRB. However, she did not create the discretionary trust which is in operation, Alec’s Will did.
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I have looked into the combined effects of ss 80- and I44 IHTA 1984 to see if the effect of s.80 would be to deem the discretionary trust as being comprised in a separate settlement which the surviving spouse created, thus possibly providing two years from Barbara’s death to re-organise the trust under s.144 IHTA 1984.
Having studied these sections this cannot work because s.80 only applies for the purposes of Chapter III of the IHTA 1984 and s.144 is in Chapter 5. Also, the wording of s.144 makes it clear that it cannot operate if there arises an IPDI between the creation of the settlement by Will and the expiry of two years from the creation of that settlement.
As a result, these popular style Wills will need great care – on the first death and during the lifetime of the surviving spouse the trustees will need to exercise their powers of appointment to appoint the remainder interests absolutely to such of the children and/or grandchildren as is appropriate in the particular case so that on the death of the life tenant (or earlier termination of the life interest) the remainder interests vest in lineal descendants so preserving the RNRB of the surviving spouse.
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