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bigduckontax
bigduckontax, Accountant
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I am an executor in a mirror will (one of 2 between spouses)

Customer Question

I am an executor in a mirror will (one of 2 between spouses) and the testator has died. The will includes a trust for the life time of the deceased and is discretionary because there are several potential beneficiaries as well as the wife. The trust has been set up to protect assets of the first deceased if the survivor is assessed for care charges. The estate is such that on the second death there are insufficient assets to attract IHT if the allowances on the first death can be transferred on the second death including the property allowance for gifts to children which I understand can also be transferred if unused on the first death.My question is, does the trust use up the IHT allowance on the first death to the extent that the transferable allowances are reduced?In that case the ultimate beneficiaries, (the deceased's children) may wish to make a variation after death to abandon the trust and make the assets of the fist deceased a simple gift to the surviving spouse.
Submitted: 7 months ago.
Category: Law
Expert:  bigduckontax replied 7 months ago.

Hello, I am one of the experts on Just Answer and pleased to ba able to help youy with your question.

My advice would be to have nothing to do with this trust and by a deed of family arrangement abolish it and distribute the deceased's estate by agreement with the beneficaries. Trusts gobble up capital with management fees and periodic Inheritsnce Tax deductions faster than an alcoholic on a pub crawl. Do not have anything to do with them.

Gloomy advice, but serious.

Customer: replied 7 months ago.
Thank you but my question was whether the will trust would impinge on the IHT allowance on the first death thereby reducing or negating the allowance that could be transferred to the second death.which otherwise would be 200% of the Nil Rate.The purpose of the trust, as stated was to protect assets if the survivor was subject to a means test for care charges.
Expert:  bigduckontax replied 7 months ago.

Well no, depending on the exact wording of the trust. My advice still holds, avoid them like the plague. By the time the administration of the trust has gobbled up all within leaving nothing to be frittered away amongst the beneficaries as has happened so many times in the past the realisation will slowly dawn. You may like to look at the following to see the advantages, if any, of trusts:

https://www.aaronandpartners.com/what-to-do-with-a-nil-rate-band-will-trust-on-death-of-first-spouse/

Customer: replied 7 months ago.
I am sorry but you have still not answered my question I have explained the nature of the trust and I would have thought the question was relatively simple.
Your general comments amount to a blanket statement on trusts (avoid them) and are not of any help. I have had 10 year and exit charges explained to me. There will be insufficient funds in the trust for it to be affected by such charges. Furthermore there is unlikely to be any significant income. The management of the trust will be a family matter without the need to incur extensive legal and accountants.
I have already explained that the purpose of the trust is to protect assets from being included in a care charges assessment if the survivor has to go into long term care in the future but there is the concern is that this may mean that they will lose the opportunity to carry forward the nil rate allowance on the seond death because that would not then be able to avoid Inheritance Tax.
The link you sent me is interesting so far as I understand it but I do not know whether putting assets in a Will trust on first death will use the NRB of the first deceased. All I wanted was a simple one paragraph response; yes it does or no it doesn't because....
My question is partly answered in their advice. that the RNRB would not be available but I still do not know whether putting th
I am sorry to say that after four days I am not any closer to getting an answer to my question.
Leslie
Expert:  bigduckontax replied 7 months ago.

This action will probably not avoid care fees, Leslie. Here is the advice from UK Care Guide:

'You cannot deliberately look to avoid care home fees by putting your property in to trust to avoid care home fees. Doing this on purpose is seen as depriving yourself of assets. If you do this, your property may still be assessed when your assets are calculated

It is possible to put your property in to a Trust and assign your property to someone else. However, there have to be other reasons as to why you put your property in to a trust and not just because you don’t want to pay your care fees.'

My original advice still stands.

Customer: replied 7 months ago.
You are wrong. I am aware of the law on deprivation of assets but that does not apply to trusts of this kind because it is not the person concerned (the person seeking care) who is depriving him/herself of assets because he/she does not receive those assets in the first place..
I am sorry but you have not given me any appropriate advice advice and have certainly not answered my question. There seems to be little point in pursuing this correspondence.Leslie Green
Expert:  bigduckontax replied 7 months ago.

If she is not receiving these assets then she has nothing to worry about. However, pound to a pinch of salt, the relevant Local Authority ars sure to insist that the formation of the trust deliberately reduces her assets to preclude any charges.

Customer: replied 7 months ago.
Sorry, I disagree. A person cannot deprive themselves of assets they have never received. The point is, it is not deprivation of assets if someone else choses not to give them those assets. I do know that the discretionary trust is an often used and recognised way to protect the assets of the first deceased.
Expert:  bigduckontax replied 7 months ago.

That may be so, but Local Authorities are very aggressive in their approach these days.

Customer: replied 7 months ago.
With respect, there is not much point in pursuing this
Expert:  bigduckontax replied 7 months ago.

I think you will find Local Authorities very unhelpful in such matter.