Discretionary Trust & form IHT 402

by **Barmyday** on Mon Oct 24, 2011 7:26 pm

Hi

I'm new to this forum. I've had a search to see if my question has been asked before, but couldn't see it. So apologies if this is old hat!

When my first parent passed away a few years ago their NRB went into a discretionary trust. Now I'm working through the paperwork for my second parent.
Do I use form IHT402 "Claim to transfer unused nil rate band" to specify the amount that was in the discretionary trust or is there another form I should use since effectively it was "used" and put into the trust. Looking on the IHT 400 Calculation form I don't see where I could put an amount from a discretionary trust.

Any guidance would be much appreciated.

Barmyday

by **Lee Young** on Mon Oct 24, 2011 8:24 pm

If the nil rate band was fully used on the first death there is no transferable nil rate band. If a percentage of it went unused, then that percentage is the transferable nil rate band and you would then need to complete form IHT102.

The whole point of the discretionary trust is that the value within it is not in the survivor's estate. Therefore by definition it does not appear in the IHT papers in the second death- if the trust was funded by way of a loan/charge then the amount will be shown as a deduction against the assets that remain in the estate.

The solicitor who helped to set up the arrangement wil be able to assit witht the paperwork. If not, I will be happy to help.

by **maths** on Mon Oct 24, 2011 8:28 pm

If on the first parent's death his nil rate band at the time was fully utilised (eg settled on discretionary trust) then there is no part of it which was unused and thus there is no claim which can be lodged by the surviving spouse to transfer any part of it (ie IHT402 is irrelevant).

by **Barmyday** on Tue Oct 25, 2011 1:52 pm

Hi Lee & maths

Thank you for your responses. That does clarify the IHT 402 issue.
In that case how do you reduce the estate by the amount in the discretionary trust and show it on the IHT 400 forms as well as the current NRB.
Surely not being able to display the DT element overvalues the estate for IHT purposes.

Thanks again

Barmyday

by **pqtaxation** on Tue Oct 25, 2011 2:59 pm

Barmyday wrote:Hi Lee & maths

.... That does clarify the IHT 402 issue.
In that case how do you reduce the estate by the amount in the discretionary trust and show it on the IHT 400 forms as well as the current NRB.
Surely not being able to display the DT element overvalues the estate for IHT purposes.

Although you say Lee and maths two posts provided clarity for you, in my view your last post might suggest your thinking is still rather muddled.

Can I suggest you just forget about (transferable) NRB for a moment and just summarise briefly when your first parent (father?) died, what was the value and nature of assets in his estate and terms of his will, was any IHT paid as a result of his death, what are the nature and value of assets from his estate held in the (discretionary) trust created on his death by his will and who has benefitted since from that trust and why, what happened to any other assets in his estate after his death and what is the value and nature of assets in your most recently deceased parent’s (mother’s?) estate.