Briefing

Will drafting – husbands, wives and related settlements

The changes made by the Finance Act 2006 will have brought many more trusts into the ‘relevant property’ regime, which had previously applied only to discretionary trusts. In it itself, the relevant property regime need not be regarded as a complete disaster. There will be an IHT charge when the settlement commences, but for the will draftsman and his client, this will presumably have been expected because there was going to be an IHT charge anyway on the testator’s death unless, for example, the exemption for transfers between spouses was available. Then there will be the charges every ten years and when property leaves the settlement. The rules for calculating these charges are ferociously complex, but it will often be some comfort that the complex formulae in s66 IHT Act and s68 IHT Act 1984 can never lead to tax being charged at a rate of more than 6%, and the rate charged will often be less. At any rate, it may be felt that this compares to the 40% marginal rate charged on a death.