Frequently asked questions
- Legal glossary
- My client is thinking of setting up an L&G Gift trust with the trustees investing in a Portfolio Bond. In the event that a chargeable gain arises whilst the Bond is held within the trust, upon whom will the gain be assessed to tax?
- In relation to a new trust, how do you determine if the trustees are UK resident for income tax purposes?
- My client is UK domiciled but his wife is currently neither domiciled or deemed-UK domicile. Two years ago, having made no previous transfers of value for her benefit, he gifted £100,000 to her (so as to reduce the amount of income tax that was being paid on the interest it was generating). I know that if he were to die within the next five years only £55,000 of this gift would be covered by the spouse’s exemption but once he’s survived for at least seven complete years from the date of this gift the £45,000 will be fully exempt and the £55,000 spouse’s exemption will be available to set against future gifts – is this correct?
- If the UK domiciled client in the previous question were to die within 7 years of the £100,000 gift but by the time of his death his spouse had satisfied the residency conditions so as to be treated as being deemed UK domicile, would the full amount of the gift be covered by the spouse’s exemption thereby avoiding £45,000 being treated as a “failed” PET?
- If the second of a married couple / RCP is UK domiciled at the time of their death, will his / her personal representatives be able to claim any unused nil rate band (NRB) of the first spouse/RCP to die even if, at the time of the first spouse/RCP’s death he / she was not UK domiciled?
- Fifteen years ago my client took out an offshore investment bond. He subsequently went to work abroad on a long-term contract. He returned to the UK in March 2008 having being non-UK resident for just over ten years. He now wishes to surrender the bond in order to help his daughter purchase her first house. Given that he will be a higher rate taxpayer in the 2008/09 tax-year and the bond is showing a significant gain, if he first assigns the bond to his daughter who then subsequently triggers the surrender, could she claim time apportionment relief even though she has never previously been non-UK resident for tax purposes?
- Why does L&G / LGII require that the lives assured on the DGS bond must be individuals other the donor / settlor and their spouse / RCP? My client’s first husband died in 1973, leaving an estate valued at £27,500 which passed wholly to my client. On her death, will her personal representatives be able to make a claim to transfer 100% of his nil rate band to set against her estate?
- I am advising the trustees of a Flexible Inheritance Loan Trust Plan (ILTP), set up in 2004, who now – in agreement with the Donor - wish to repay the outstanding loan to him and to then distribute the balance of the value of the Trust Fund amongst the beneficiaries. I am considering recommending the assignment of policies to the Donor in satisfaction of his loan so as to avoid the trustees having to surrender some of the policies, thereby triggering a chargeable event and the application of the early surrender provisions. Once the Donor has been “repaid” the remaining policies can be assigned to the intended beneficiaries. Will this work?
- I have recently been appointed to give investment advice to the trustees of a nil rate band discretionary Will Trust (DWT), the testator (settlor) of which died in December 2007. Because his personal representatives were able to claim a 100% transferable nil rate band (TNRB) no IHT was due on his estate and £600,000 was placed in the DWT with the small residuary balance of his estate passing to charity. Am I right to advise that any distributions from the DWT before the 10th anniversary (TYA) of the testator’s death will not give rise to an IHT Exit charge under the relevant property regime?
- If a Will establishes a nil rate band DWT with the balance of the deceased’s estate being held on an immediate post death interest (IPDI) for the surviving spouse, will the IPDI be treated as a “related settlement” (as per IHTA84/s.62) for the purpose of calculating any 10 year anniversary (TYA) or Exit charge that falls due on the DWT?
