Very Tricky Case - NRB Discretionary Trust

[andyk74]

Hi,

A bot of a mess this one - I have a rather complicated case and would appreciate any guidance.

A new client came to see me regarding his wife's NRB Discretionary Trust

This was set up following her death in 1990. £99,000 put into trust (I understand NRB then was £128,000) - this was her whole estate. Majority was 1/2 share in house of £75,000 rest savings & investments

Husband is main beneficiary of trust and then son. Husband is trustee.

It appears what husband did was transfer all savings & investments in her name into his sole name
House is still held in their joint names

It appears since then husband has just carried on living in the property and dealing with investments - but says has not really utilised any of them

he has filed no tax returns for trust

1. Would the transfer of the investments he made right after death be deemed an election and so are now his assets? If so I take it there is no way this could be added back to the trust?

2. If the house is stilll held in joint names is it correct to say that it is arguable that this is still held in the DT with him as co-owner? Should anything be done with Land Registry?

3. Should he report anything to HMRC?

4. Is it right that 77% of wife's NRB was used in setting up trust leaving Husband 23% to add to his own on his death?

5. Any other advice?

Many thanks
Andrew

[Lee Young]

1 The answer might be academic if whether or not the assets are still in the trust the estater of the survivor does not exceed the available nil rate band. If the transfer was done within 2 years of death this could benefit from s144, decreasing the amount in the trust and increasing the available transferable nil rate band.

2 The house can still be in the discretionary trust - the interest of the trustee shoud either be recorded as owners or at least by way of restriction, the title then being transferred into the name of the survivor.

3 I always report the exsitence of the trust to the revenue by form 41g, even though strictly it is not required unless income or gains might arise. If the shares etc are to be viewed as in the trust then there might be past reporting requirements and possible income tax bills for the dividends and interest etc.

4 Yes, if the £99,000 all went into the trust (strictly 77.3437%).

5 Put in place an investment policy statement and run the trust properly from now on!