Malcolm Finney looks at some inheritance tax computational issues and related planningâ¯aspects of discretionary trusts.
For inheritance tax (IHT) purposes, trusts are basically divided into two categories; trusts with a qualifying interest in possession, and those without. Those trusts which do not contain qualifying interests in possession are referred to as relevant property trusts (RPT), which include discretionary trusts.
Relevant property is, broadly, trust property in which no qualifying interest in possession subsists (IHTA 1984, s 58(1)); it would include deemed accumulated income (IHTA 1984, s 64(1A)) but not excluded property (IHTA 1984, s 48, 58(4)).
RPT charges
RPTs are exposed to two types of IHT charge: a ten-yearly charge (IHTA 1984, s 64) and an exit charge (IHTA 1984, s 65).
The ten-yearly charge is levied on the
