Life Interest Trust - A Query On Detail

[dzug2]

When the beneficiary of a life interest trust dies, I understand the capital value of the trust is treated as an asset of their estate (for IHT purposes, etc) but not for deciding who inherits (decided by the terms of the trust).

Question is - would the capital value be included in the gross and/or net value of the estate on the Grant of Probate? I can see where the figures go on the PA1/IHT205 - but it's not clear what the Probate Office do with them after that

[themas]

I'm no expert, but if your first statement - ie that the capital value of the trust is part of the estate of the deceased who had a life interest - then surely the capital value has to go on IHT 205 (or IHT 400 if applicable). Otherwise, HMRC would not have the figure available to calculate how much - if any - IHT liability there was.

However, I - in my ignorance - cannot see why the capital value should be in this estate. The deceased only had a life interest. He/she did not own the capital, so I can't see why their estate should be subject to IHT as if they did. Hopefully, someone with more knowledge will put me right.

I suggest you take this up with HMRC IHT helpline to clarify exactly what you must do.

[dzug2]

Thanks for your reply Themas.

The reason for IHT is that during their lifetime it was an asset that produced them income and thus was in a sense 'theirs' at the time of their death. Immediately afterwards of course it passes to the other beneficiary of the trust.

The problem in this case is not HMRC (no IHT involved anyway) but the Probate Office. As I'm not executor (rather I'm checking up on the Executor) they quite rightly won't talk to me about it.

So the question becomes which of the boxes D F and H on the IHT205 is used to arrive at the figure on the grant? I 'know' to a reasonable degree of accuracy what these figures 'should' be - but they are way out whether the trust is included or not. I'd like to get my facts straight before querying the executor.

[FredPuli43]

Surely you, or anybody, can ask the IHT advice service what to do. I mean, you could be the beneficiary of a trust and want to know what will happen when you die, or you might be contemplating setting up a trust, or anyone else who needs to know. You don't have to be in a real situation, with a real case to ask about.

[dzug2]

Thanks for that Fred - I hadn't realised there was a separate general helpline (who were very helpful once I'd explained the question properly) as opposed to calling 'A' probate office or 'A' tax office.

The answer is that the value of the trust is not included on the Grant of Probate but is of interest to HMRC for determining whether IHT is due