Transfer from two-year discretionary trust

[David01]

I am the trustee of a two-year discretionary trust set up by the Will of my mother-in-law. Immediately prior to the budget we set up, and registered with HMRC, a second trust into which the assets from the two-year DT will be transferred.

My question is regarding the transfer of assets into this second trust in the light of the Budget.

I've been given a copy of an article, "Lack of Trust", from Taxation Magazine that advises against any transfer from a DT until the uncertainties from the Budget are resolved.

The key aspect seems to be that there is an anomaly which means that if the death was before 22 March 2006 but no appointment has yet been made from the two-year DT, IHT may subsequently be payable as "the trustees cannot bring themselves within s 144".

This issue is apparently under review and the article ends by warning trustees to "defer exercising their powers of appointment until after the report stage".

Has this issue been clarified or is the general advice still to hold off from appointments out of a two-year DT?

[Lee Young]

This has been dealt with under the provisions of para 27 of Schedule 20 of FA 2006, passed last week. There would appear to be no issues now.

[David01]

Many thanks for your quick reply. In that case I'll go ahead with the transfer.