A&M Trust help

[sw879]

Hi all

I was wondering if someone might be able to help me with an A&M trust query.

The settlement was made June 1997 and was an A&M trust at the time (initial value was £10). The beneficiaries are the Settlor's two children who would receive the capital at 25. First child, A (born 1984) and the second child, B (born 1985).

I understand that the trust was an A&M trust until 6 April 2008 and then it fell into the discretionary trust regime. The trust assets were treated as “relevant property” as the trustees did not change the terms of the trust. I also gather that there was no principal charge in June 2007 because the trust assets were not within the relevant property regime at that point.

I think that a ten year exit charge and a principal charge would apply on June 2017. Is this correct? Two distributions were made in 03 (£200,000) and 06 (£342,000) and the value of the trust assets were worth £203,900 in June 2017 (I don't know the values of the trust pre-2013).

I have tried to calculate what I think would be the exit charge below:-

Exit charge calculation in June 2017:-

Trust assets in April 2008:- ?? (Assume 1 million)

Nil rate band:- £325,000

Less chargeable distributions

10 years before June 2007:- £542,000 (£200,000 to child A in 03 and £342,000 to child B in 06)

• 1,000,000 less NRB = £675,000
• £675,000 plus £542,000 = £1,217,000 (add the chargeable distributions)
• £1,217,000 @ 20% = £243,400
• Effective rate: 243,400/1,000,000 x 100 = 24.34%
• Actual rate: 24.34% x 30% x (40 – 3)/40 = 6.754%
• Exit charge in June 2017 was £36,606.68, the chargeable distributions (£542,000) x the actual rate (6.754%)

Quarters June 2007 to June 2017 = 40
Quarters June 2007 to April 2008 = 3

I'm trying to work out what IHT was due when, on what basis, and what the assets were at the relevant time and how much is payable. Also how much IHT will be payable if the trustees were to distribute everything now.

Any help or guidance would be greatly appreciated.

Many thanks.