A chargeable lifetime trust was set up by my late father in the names of two of his grandchildren. He only lived a further six years and six months after he made the gift and so it failed. There is a complete conflict of advice. Some say the estate should pay the IHT, some say the beneficiaries and some say the trustees. It would seem that the fairest solution is that the trustees should pay the IHT, as my brother and I, who inherit the remaining estate 50/50 in the will, do not benefit in any way from the chargeable lifetime trust.

Under certain circumstances, one looks at the 14 years before death, but generally one takes the date seven years before death. From this date, one goes forward chronologically looking at the gifts the deceased made (including chargeable lifetime transfers into a trust) and offsetting these gifts against the IHT threshold (or ‘nil rate band’ (NRB)) available at the date of death. If the transfers into the trust are completely covered by the NRB, any IHT payable is due to later lifetime gifts and the death transfer. If so, the IHT payable is borne by the estate. If the transfer into the trust is not completely covered by the NRB, then any extra IHT payable on death, because of the transfer into the trust, is paid by the trustees.