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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I am executor to my Auntie's will. All is clearly defined but

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I am executor to my Auntie's will. All is clearly defined but she was in receipt of a trust income which ceased on death and reverts to the children of the partners family.
Mr A separated from wife and lived for 5 years with Auntie . Wife recd 20 % and Auntie 80% of trust income. Wife died before Auntie who then recd 100% of trust income until her death.
The trust is being dismantled I have been informed.
Auntie had paid income tax to date on her income.
Q: Presume there are no other taxes to pay from Aunties estate?
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience.

The trust you describe would appear to be a life interest trust (sometimes known as an interest in possession trust). Is this term familiar to you in relation to the trust please?
Customer: replied 2 years ago.

Yes, a life interest trust.

Expert:  Joshua replied 2 years ago.
Many thanks. This being the case, as you suggest the income will cease upon your aunts death and the capital will revert to the remaindermen - from what yousay the children of her partner. The trustees of the trust will be responsble for ensuring this happens and it is not your responsibility to deal with this unless you are also a trustee of the trust.

In terms of tax for your aunts estate, for the purposes of inheritance tax, the estate is treated as if your aunt owned all of the assets on which he had a right income absolutely and the value of thos assets must be included in her estate. So for example if the trust had assets of £100K on which your aunt had a right to income you would need to include the £100K of assets in her estate return as if she owned them outright. This comes as a suprise to many. This is not the case where she was only entitled to discretionary income from the trust as opposed to a right to income. Providing the value of the trust in additional other assets your aunt owned do not exceed the inheritance tax threshold there is no tax to pay.

If the addition of the trust assets push the estate over the inheritance tax allowance for your aunt then you will need to consider retaining a solicitor to assist you as working out inheritance tax for trust is complicated as you will need to look at claiming from the trustees of the trust the portion of tax due for IHT on the trust.

Otherwise the only other aspect you need to consider is finalising your eyes income tax position to ensure she has neither paid too much nor too little which you can do by contacing HMRC income tax line and asking them to provide a final calculation for income tax. Many people do not bother with this but it should be done as a matter of best practice.
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Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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