This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Who is the remainderman in an Interest in Possession trust?

Trustworthy
Posts:5
Joined:Thu Feb 13, 2020 11:49 pm
Who is the remainderman in an Interest in Possession trust?

Postby Trustworthy » Fri Dec 08, 2023 9:18 pm

I am a trustee of an Interest in Possession trust set up in the 1990s. The Settlor (also trustee) and his co-trustee are both deceased.

The deed states that ‘The trustees shall pay the income of the trust fund to the principal beneficiary for life.’ and, at the trustees’ discretion, part or all of the capital (but in practice no capital has ever been disbursed). The second named beneficiary was the original co-trustee. The third named beneficiary is any UK charity.

The trustees also have the right to appoint additional beneficiaries, but none have been to date.

The trust deed names the original co-trustee as the ultimate beneficiary of the capital and income of the trust fund. As he is no longer with us, my question is:

What happens to the trust fund when the principal beneficiary passes on?

Will it form part of his estate?

Or

Could the trustees simply appoint a new beneficiary, or beneficiaries, at that time? (Or should we do so now?)

Or

Could we carry on as before but with a UK Charity of our choosing entitled to all income arising from then on?

Or

Could we wind up the trust and pay out to a UK charity?

AGoodman
Posts:1745
Joined:Fri May 16, 2014 3:47 pm

Re: Who is the remainderman in an Interest in Possession trust?

Postby AGoodman » Tue Dec 12, 2023 11:24 am

You need to get a trust law expert to look at the exact wording as the position should be clear but will depend on the precise terms.

I assume the PB is still alive.

The estate of the "second named" beneficiary may receive the capital outright on PB's death if it says that he/she should and there is no condition that they must survive the principal beneficiary. If there is a survival condition, then you move down to the next provision.

For example, it might say:

"Subject as above, the trustees shall hold the income and capital of the trust fund for X absolutely". This would usually vest in X's estate whether or not X survives the person above.


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”

cron