The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Peter Gausden, Consultant Solicitor at Rowlinsons provides comprehensive and up to date tax information covering:
A so-called ‘precatory trust’ is when a testator makes an outright gift of property to a legatee, but also includes in the will an unenforceable direction to the legatee to further dispose of the property in favour of others. Often the direction is expressed as a ‘wish’, ‘hope’, or ‘desire’. Since no imperative fiduciary duty falls on the legatee, as with a normal trust, the legatee is free to ignore what the testator has said and is at best under only a moral obligation to dispose of the property in accordance with the testator’s direction.
If the legatee chooses to respect the testator’s direction and transfers the property, issues can arise as to whether there is a transfer of value for inheritance tax or a disposal for capital gains tax purposes.
The only direct statutory guidance relates to inheritance tax.
Since the gift initially takes effect as an absolute one, inheritance tax rules apply in the usual way. If the gift is to the testator’s spouse or civil partner, it will be exempt; otherwise it may be chargeable depending on the rest of the estate. Section 143 provides that if the named beneficiary transfers the proper
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