Unwinding Unwanted Nil Rate Band Trusts
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Many existing Wills contain a nil rate band trust which became unnecessary for its main intended purpose with the introduction in October 2007 of the transferable nil rate band between the estates of spouses. Where both spouses are still alive a new Will can be made to revoke the nil rate band trust will but if this is not done for whatever reason, the nil rate band trust can still be unwound after the death of the first spouse.
The easiest way to do this and unwind the trust is for the trustees to appoint the trust assets in favour of the surviving spouse absolutely. This must be done within two years of death but not within the first three months following the death of the first spouse. Provided these time limits are complied with the appointment will be treated for IHT purposes as if the assets had simply been left to the surviving spouse outright, so the surviving spouse will have the benefit of the transferrable nil rate band. See Section 144 IHTA 1984. If the appointment is made within 3 months of the date of death it may be treated as a chargeable IHT event and there will be no reading back in to will.
Provided that the appointment is made during the period of administration the estate, which it normally would be, it will not give rise to a capital gains tax liability as the spouse will acquire as legatee.
The appointment out during the administration of the estate may be the preferred option but there are of course other uses for nil rate band discretionary trust wills, in addition to the preservation of the nil rate band of the first spouse, so this should not be done without full consideration of any other benefits preserving it might achieve.
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My family had the pleasure of Jan Atkinson working with us on the will and probate issues of [my mother's] estate in Camden and Ireland after she passed on last year. Jan and her assistant(s) offered us a fantastic service at a sad time.
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The team is very caring, experienced and detailed and was clear about the next steps and offered very helpful advice and suggestions
Jan Atkinson has extensive experience in private client matters, which underpins her excellent skills in the contentious probate area. Plus she is strong on international matters
A small but formidable team, punching above its weight. Jan Atkinson is a seasoned pro. Approachable but no push-over
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The situation was handled by your extremely competent, efficient hands - I would not hesitate to recommend Osbornes to others.
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The Will, Probate and Disputed Estate Team View the whole team
Jan Atkinson
Partner
Wills, Probate & Disputed EstatesMaggie Leiper
Partner
Wills, Probate & Disputed EstatesElspeth Neilson
Partner
Wills, Probate & Disputed EstatesJenny Walsh
Partner
Wills, Probate & Disputed EstatesFlorence Arbuthnott
Associate Solicitor
Wills, Probate & Disputed EstatesSuzanna Baker
Associate Solicitor
Wills, Probate & Disputed EstatesView the
whole team
