I am a trustee of what was set up as a discretionary trust on my stepfather's death in 2001 with the wish that it should be used for my mothers benefit during her lifetime. The trust consists of Life Insurance bonds linked to the lives of my mother and my stepfather. Up to now it has not been registered.
The three trustees (myself, my sister and my mother) signed an instruction to make regular payments to my mother which could not be changed without her agreement since she was one of the trustees. She has now died and the life policies are closed with a value ready to be paid out. I have received chargeable event certificates which are in the name of my mother (not the trust)
I understand the 20% notional tax on the bonds cannot be recaimed. but that I may need to do a trust tax return and the trust would then need to pay a suplementary tax of 25% on the chargeable gain. Normally when trust tax is paid it can be reclaimed by the benefiaries if they are non tax payers. How do I give my sister a tax certificate so she can relaim the 25% paid?
Alternatively, I am wondering whether by giving my mother the benefit of the bonds, we may have changed the nature of the trust. If so then might it need to be declared in her probate application? If the bonds became part of her estate by cause of a change of status of the trust this wouldnt result in an IHT payment because with her nil rate band, the reseidential nil rate band, and the transferrable nill rate band from her husband, the estate is not sufficiently large to pay IHT.
All advice gratefully received.
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