A client set up two life interest trusts about 20 years ago - one for each of his two sons. He settled 1/3 of the shares in his unquoted trading (retail) company into each trust retaining the remaining 1/3 for himself. The terms of each trust are such that all income is mandated to the beneficiary. The mother and father are the trustees of each trust. I can’t establish whether Gift Relief was claimed on the setting up of the trusts but imagine it was.
The sons are of an age where the father would like to disband the trusts and let the sons own the shares outright.
The company is provisionally valued at £700k in March 1982 and is worth about £1.8m now. Each trust would be liable to 1/3 of the overall gain at 20%.
Two questions:
1. Can the trustees gift the shares to the beneficiaries and claim Gift Relief on the transfers and wind up the trusts.
2. Are there any IHT traps that might be lurking that I should be aware of or that could trigger disapplication of Gift Relief?
Thank you in advance.
Aidan Smyth
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