IHT400 and Trust help please

[Steve9]

Hi
I am filling in an IHT400 form for my dear friend's Dad who died, his Mum died before his Dad and she left her assets in a Discretionary Trust.
On the IHT form on box numbered 45 under the heading "Assets held in trust" I am thinking I should put an "X" in the box marked Yes, as to my way of thinking he did have a right to a benefit from his late wife's Trust from any assets held in the Trust, by the way he was a Trustee and a beneficiary.
Any help would be gratefully received and thank you in advance.
Steve

[AGoodman]

The answer is "no" if it is a discretionary trusts.

As per the guidance: "You must complete Schedule IHT418 if the deceased had an interest in possession". If it was discretionary, he did not have an interest in possession (it means a right to income as it arises).

This makes sense as his status as a discretionary beneficiary should not be subject to IHT.

[Steve9]

Thank you for the reply AGoodman, I must admit I was a bit surprised at the answer. Could I put a scenario to you please? What if rental income was received from property which was in the trust, surely that would mean the dad would have and indeed he did receive the rental income until his death?
Or does that discretionary trust mean that although he could have received income or had interest in the trust it was not a requirement or legally binding it was his and his alone?
I must admit I thought it was going too well, I may have to think again!

[AGoodman]

The latter.

The trustees (including your father) may have received income and decided, however informally, to pay the income to your father. That does not however mean that your father had a right to that income. The trustees could have retained the income if they so chose.

Q45 is not exactly very clear (some might say opaque) but that applies across the IHT400.

[AGreen]

I was wondering the same - if iht 418 had to be filled in for my late husband's estate . I always thought this form was only for qualifying interest in possession trusts but when I rang hmrc they said any type of asset placed in a trust. I have a protection for life policy. No cash in value or surrender value. It is in a flexible split trust and the trustees can choose on my death who they pay out to from a list of possible beneficies and a named beneficiary. My husband was the named beneficiary. It does not produce income . Wondering if anyone could clarify what I have been told. I took out the policy in 2009 so not a pre march and not a ipdi or any of the other interest in possessions listed. As for the question about future right to benefit, any of the beneficiaries can benefit depending on who trustees choose unles they failed to make a decision within 79 years and then it would pay to the named beneficiary. As for the the box that asks for a value at time of his death that would be 0 as it has no cash in value or open market value.

[AGoodman]

No, the guidance remains the same and it does not sound as though your late husband had an interest in possession.

HMRC's statement is right in that the nature of the asset is irrelevant - it is the terms of the trust that matter. However, it doesn't sound like your late husband would have had an interest in possession. Had you died first, he would not have had a right to the income from, or capital of, the insurance proceeds.