New queries, issue 4553

Estate management

Interaction of gifts with reservation of benefit and ‘same-day additions’.

A client created a trust in December 2015 to receive some farm buildings used in his former farming business. This triggered a gain and entrepreneurs’ relief was claimed. The trustees have decided to convert the buildings into residential accommodation. The settlor is also the life tenant of this trust and it is therefore a gift with reservation of benefit under FA 1986 s 102. Because this was not a qualifying interest in possession IHTA 1984 s 80 did not apply and the gift into trust was a chargeable lifetime transfer.

The client’s will leaves two other rental properties on a separate trust to pay the income to his two adult children during their lifetimes and to protect the assets for future generations. Excluding the gift with reservation of benefit his estate is...