IIP double trust with IOU

[Caro]

As part of Inheritance Tax planning family entered into a scheme 2 x IIP Trusts using IOU to get the house out of the estate for IHT purposes. We have not yet elected into paying POAT. We now understand that this scheme is ineffective. Should we now:

1. Dismantle the trusts (if yes what happens to the zero coupon loan note used)?

2. What is the mechanism for doing this (I presume you do not just burn the paperwork!)?

3. Why can't you just burn the paperwork, I presume this is something to do with having established a fiduciary relationship (if yes with whom?)?

4. If the Trusts are dismantled will the assets revert to settlor?

Sorry to be so dim.

[kirstie.williamson@a]

In the first instance you should go back to the solicitor / advisor who set up the scheme to discuss your options.
You do no elect into POAT - you have to pay it unless you elect back into IHT. There is a specific form to do this. The first tax return on which POAT must be paid is 2005/06, ie the return for the last tax year so you have may already been caught for at least one year.

You need to speak to the advisor asap.

KW