Q&As

If an existing nil rate band will trust activated by the death of the testator has been varied once, eg to include a Spouse Undertaking, can the trustees then vary the trust again to determine how the trust should be repaid? What are the tax and non-tax implications of a further variation?

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Produced in partnership with Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 26/04/2016

The following Private Client Q&A produced in partnership with Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • If an existing nil rate band will trust activated by the death of the testator has been varied once, eg to include a Spouse Undertaking, can the trustees then vary the trust again to determine how the trust should be repaid? What are the tax and non-tax implications of a further variation?

If an existing nil rate band will trust activated by the death of the testator has been varied once, eg to include a Spouse Undertaking, can the trustees then vary the trust again to determine how the trust should be repaid? What are the tax and non-tax implications of a further variation?

A nil-rate band discretionary trust is a device often used to minimise inheritance tax. It will apply ordinarily to property owned by two parties (usually husband and wife). The parties must hold the property as beneficial tenants in common, and thus any beneficial joint tenancy must be severed. The parties then each make a Will, whereby their interest in the property, up to the nil-rate band for inheritance tax, is left not to their spouse but rather to a discretionary trust. The discretionary beneficiaries are usually the surviving spouse and children. Rather than the surviving spouse inheriting the other’s share of the property (whether by survivorship where held as beneficial joint tenants or as a bequest), the trust holds the share and, when the surviving spouse dies, the share held by the trust will not form part of the estate for inheritance tax purposes. Such a trust can also be established even if no such provision is made by Will, within the period of two years, by way of a deed of variation.

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