I created a trust in March 2005 and another in February 2009 both in favour of my son for life with remainder to my grandchildren. Explain fully the inheritance tax regime for both trusts.

Private Client and Estate Planning (LPC)

Part A – (Total marks 39)

Your client is Trevor Corbold referred to as “I”, “my” and “me” below.

I will be 75 years of age soon. I want my son and daughter to assist me with all monetary and financial decisions. Please advise as to the procedure for doing this and what information you require including any problems in the instructions I have given. [see Instruction No.1 on page 5 for details]

I have had considerable discussions with my family about the covid-19 vaccine. They are very much in favour of me having it, but I have never reacted well to vaccines and do not want it. Advise me as to what I can do about my medical wishes without any of my family’s involvement should I become incompetent. (12 marks)

I own a substantial number of shares in my company “Rostov Ltd” worth about £3m. I intend to dispose of them. Please advise as to the capital gains tax rate that I will have to pay on their disposal. (5 marks)

My Aunt Katie died a few days ago. I visited her just before her death. She told me that she didn’t think she was going to survive and wanted me to have her priceless antique vase which was on the table in her bedroom. Please advise on the capital gains tax implication of this. (5 marks)

I am to be the executor of Aunt Katie’s estate. She owns a number of properties and shares which are to be sold according to her will. The beneficiaries are a number of charities and her young great-grandchildren. Would it be best from a capital gains tax viewpoint if I sold the properties and shares as executor or would an alternative method be more beneficial? (5 marks)
Advise in the following two separate situations below: (10 marks)

In March 1990 I acquired a plot of land in Blackpool for £50,000 and sold part of this in February 2021 for £210,000. There was a bungalow on the part sold which I used as a second home. The remaining part is worth £60,000. My taxable income in the 2020/2021 financial year was £27,500. What capital gains tax is payable on this transaction? (8 marks)

I would like to transfer some shares to my daughter Evanthia and was wondering if there was a capital gains tax efficient method of doing this? (2 marks)

I acquired a maritime artefact in 1980 for £20,000; it later turned out that it belonged to Admiral Nelson on his ship “HMS Victory” at the Battle of Trafalgar. As a result, it has apparently increased in value by £1000 each year since then. In May 2021 I disposed of the asset for £40,000. Please tell me what the gain is likely to be for capital gains tax purposes. (2 marks)

[End of Part A]
Part B (Total 38 marks)
Your client is Douglas Mortimer (referred to as “I”, “my” and “me” below)

I created a trust in March 2005 and another in February 2009 both in favour of my son for life with remainder to my grandchildren. Explain fully the inheritance tax regime for both trusts.
marks)

At the current time I own and live in a house in Mill Hill, London. I am considering transferring full ownership of this house to my single daughter Abigail though I would pay the bills. Please advise as to any inheritance tax implications of this arrangement.
marks)

My Uncle Apollo died in July 2018 and left his son Perseus (my cousin) some property worth £20,000. His estate paid inheritance tax of 40% on the amount. Perseus died March 2021 and has left that property to me in his will. Please advise on the inheritance tax situation of this property as it is not covered by his nil rate band. I understand that the value has not changed for probate purposes.
(6 marks)

My three grandchildren Azariah, Ziporah and Agnes benefit from two lifetime discretionary trusts both worth £465,000 each (Trust A and Trust B). Trust A was created by me in March 2011 for the three grandchildren who at the time were aged 7, 5, and 3. No payments have been made by the trustees to any of my children and the fund in Trust A is worth £500,000 as at March 2021.

Trust B was created by my wife Sharon in March 2018 and the trustees on April 1, 2021 made a payment of £120,000 capital to my grandson Azariah who is now 17. There has been no capital growth of this fund so far.

For Trust A please calculate the ten-year anniversary charge that will be payable.

For Trust B calculate the exit charge payable on the £120,000 capital appointed to Azariah.
(Assume for both trusts that the full nil rate band is available)
(12 marks)

[End of Part B]

Part C (Please see Instruction 2 on page 6) (23 marks total)

Your Client is Stefan Truss (referred to as “I”, “me” and “my” below)
I have given you a copy of my home made will. My wife who jointly owns my house with me has made a similar will.

Please advise me as to any changes that need to be or should be made.
Is this will likely to protect the survivor from having to pay care home fees should the survivor need to enter a care home?
Can any children of Susan Collins benefit from my will if they are born after my death?
What is the effect of the gift to David Statman being “free of tax”?
Are there any difficulties with the gift in Clause 9?
Should any of the trusts that I have tried to create be re-drafted to make them more tax efficient?

(20 marks)
[Note to students – you are NOT expected to re-draft the will]

Further advise me on the following matters:

What are the consequences if my wife and I both die in an accident together?

I have a daughter Emma who I have not seen for some years. She is 25 and for personal reasons I want nothing to do with her. The last I heard was that she was living in a hostel for recovering drug addicts. Is she able to make any claim against my estate when I die?
(3 marks)

[End of Part C]

[End of Questions]

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