13. IHT & TRUSTS Flashcards

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1
Q

What is an IIP

A

A to life, remainder to B

different rules to trust law

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2
Q

Pearson v IRC

A

IIP = present right to present income (ordinary natural meaning)

power to accumulate = not IIP

power to advance capital = can be IIP
power to terminate present right to present enjoyment = advancement
power to prevent PRTPE = accumulate (not IIP)

admin power = can be IIP

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3
Q

Taxing IIP trusts (old)

A

s.49 - trust property treated as property of life tenant (absolute gift)

S –> A (absolute gift)
A –> B (absolute gift)

IGNORE the fact S gave assets to T to hold for A

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4
Q

Taxing IIP trusts (RULES)

A

S SETTLES

  • if on death = normal IHT (40%)
  • during life = PET

A gives to B (s.51-53)

  • on death = normal IHT (40%)
  • during life = PET
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5
Q

Taxing discretionary trusts (now RPR regime)

A

charge on entry

  • inter vivos = 20% (LCT)
  • death - normal IHT (40%)

10 year anniversary charge (s.64 up to 6%)
exit charges to prevent avoidance (s.65)

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6
Q

old regime only applies now when (s.59)

A

ONE - IIP trusts created before 2006
TWO - IIP trusts created after 2006 on death
THREE - transitional provisions apply
FOUR - inter vivos post 2006 within s.89B (disabled trust)

transitional provisions
- s.49A: old IIP treatment for first life interest but on A’s death, non-IIP rules apply (RPR) unless B’s interest qualifies under another head (e.g. disabled)

  • others: give up life interest within certain time and B’s can be under IIP too
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7
Q

relevant property regime now applies for

A

ONE - IIP trusts created after 2006 (and now QIIP)
TWO - ALL discretionary trusts not deemed QIIP (e.g. some disabled)
THREE - all IIP trusts unless favoured property regime applies

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8
Q

accumulation and maintenance trusts

A

used to be under IIP rules

  • now bereaved minor trust (s.71A)
  • and 18-25 trusts (s.71D)
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9
Q

favoured property

A

not QIIP

  • special treatment
  • no 10 year charge
  • own rules
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10
Q

bereaved minor’s trust

A

gets old a&m treatment (i.e. old IIP treatment)

  • no exit charge or 10 year charge
  • no IHT on B’s death
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11
Q

18-25 trusts

A

BMT continues till 25

  • at 25, charge equivalent to periodic charge applies (but starting at 18th bday)
  • max periodic charge = 4.2%
  • earlier distribution = lower charge
  • no charge on death of B before 18
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12
Q

Trusts for disabled persons

A

old IIP treatment

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13
Q

Charitable trusts

A

s. 58
- not RPR
- tapered charge arises if settled property ceases to be this kind or T makes disposition reducing value (and disposition is not for charitable purpose)

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14
Q

employee trusts

A

s. 58, not RP
- s.86(3) defined
- tapered charge

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