The Land Registry and Inheritance Tax (part two of two)
Posted on March 8th, 2010 by Stephen
The Land Registry, in their useful IHT guide number 70, go on to explain what happens if you didn’t make the trust before the first death of a couple and talks about how you can changes a person’s will after they have died; but there are specific rules that govern this.
Trust created after the first death
If spouses or civil partners whose families would benefit from such a scheme do not take the necessary steps before the first death, the surviving partner and their family can enter into a deed (often called a deed of family arrangement) to create one. The deed will vary the disposition of the property comprised in the deceased’s estate that has already taken place at the time of the death – whether effected by will, under the law relating to intestacy or otherwise (for example, under a right of survivorship in respect of joint property) – in order to put the appropriate scheme in place and permit the IHT savings described in section 3.1 (Trust created before the first death of a joint proprietor). Provided this is done within the period of two years after the first death, tax law treats the arrangements as if they had been made by the partner who has died.
Finally, a section of the guide answers the long lost question about ending a trust ‘How can a trust be ended?’
Bringing the trust to an end during the surviving partner’s lifetime A nil-rate band discretionary trust may subsequently be found to offer no tax advantage, either because of the introduction of transferable nil-rate band on the death of the second partner on or after 9 October 20075, or because increases in the individual IHT exemption have taken the nil-rate band above the combined value of the assets in the trust and the survivor’s own assets. If this is the case, a surviving
partner may, with the agreement of the trustees, decide to bring the trust to an end in order to make the assets available during their lifetime. Provided it takes place within two years of the first partner’s death, HM Revenue & Customs will treat an appointment of the trust assets in favour of the survivor as if they had been left to them outright.The appointment is of no interest to Land Registry, as it is not of the legal estate. But if, as a result, the surviving partner becomes entitled to the whole of the beneficial interests free from any encumbrance, they may apply to cancel any Form A restriction, and those with the benefit of other restrictions can apply to withdraw them. A statutory declaration or statement of truth by the applicants, or a certificate by their conveyancer, that none of the beneficial shares in the property has been encumbered will need to accompany an application.
Our genuine thanks goes to the Land Registry for their completion of this guide.
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