Stewart Jordan advises on how to administer nil rate band discretionary trusts
Most practitioners, whether advising on lifetime tax planning or advising executors after the death of the first spouse or civil partner, can deliver a well rehearsed speech on the importance of including a nil rate band legacy in wills. This will usually be followed by a broad-brush outline of the mechanics of implementing the arrangement after the first death, ie by using a debt or charge to satisfy the nil rate band legacy in situations where the family home is the most significant asset. Before the trust is constituted, how many practitioners have considered the administrative and compliance aspects of running these trusts?
Consider these typical cases:
- Scenario 1 There are insufficient liquid assets in the estate to satisfy the entire nil rate band legacy. However, the deceased spouse’s half share of the family home is of sufficient value to satisfy the entire legacy.
- Scenario 2 The deceased spouse’s half share of the family home is worth less than the nil rate band amount, but they have modest savings and investments
