Case Study Discretionary Trust

05 December 2017

By Probate Solicitor Kate Rutherford

Client Situation

Mr R established that as Executor of his wife’s Will, he needed to obtain Probate for her Estate following her death. He contacted our Probate team through our website. One of our Probate Consultants met with him at his home to take details of his wife’s Estate and to provide a fixed fee quote for our Probate service.

With our Probate Complete Service we take full responsibility for obtaining Grant of Probate and dealing with the Legal, Tax (excl VAT), Property and Estate Administration affairs*.

Mr R instructed Co-op Legal Services to administer the Estate on his behalf and the case was allocated to our Probate Solicitor, Kate Rutherford.

How We Helped

Mr R’s wife had left a Will which contained a Nil-rate Band Discretionary Trust (‘the Trust’). A Discretionary Trust Will allows the Trustees to decide how income from the Trust will be used and how to distribute the contents of the Trust to Beneficiaries. A Nil-rate Band Discretionary Trust is a version of this which used to be commonly used to reduce Inheritance Tax liability on an Estate.

No doubt the Trust was included in Mrs R’s Will to ring fence her Inheritance Tax nil rate band (currently £325,000) so that it would not be lost. These types of Trusts used to be very useful, but the rules changed in 2007 and many of the reasons why these types of Trust were used are now no longer relevant. This is because the law now states that if a spouse leaves his or her whole Estate to his or her surviving spouse then on the survivor's death, two nil rate bands (based on the up to date tax thresholds) can be used.

The Outcome

After discussing the matter with Kate and being advised of other reasons why the Trust may have been useful despite not being needed to preserve Mrs R’s inheritance tax nil-rate band, Mr R and his daughters decided that they did not want to keep the Trust. Kate therefore drafted a Deed of Appointment so that all of Mrs R’s Estate could pass to Mr R. Following the sale of the family home and once investments were encashed, the whole Estate was distributed to Mr R.

Mr R was then advised to keep copies of all of the Estate documentation in a safe place so that the Executors of his Estate will be able to claim the transfer of Mrs R’s full inheritance tax nil-rate band in the future.

Mr R was very pleased with the outcome and the support that he received from Co-op Legal Services. He contacted us to say, “Thank you for the most professional and responsive way in which you dealt with the Estate of my late wife. Your support during this sad period of my life was much appreciated and I will have no hesitation in contacting you again when I need legal advice.”

*We can also pay all the costs of a Co-op Funeralcare funeral, providing the Estate owns sufficient assets which can be sold in due course to repay our costs.

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