What are assets held in trust for the benefit of the deceased?

If an asset is “in trust” it is part of an arrangement (a trust) whereby some people (trustees) manage assets, money, etc, for the benefit of another, in this case the deceased.

Such assets are added to the estate for inheritance tax purposes, notwithstanding the fact that they are held in trust and therefore are not owned by the deceased.

If no such arrangement existed for the deceased, personal representatives can skip past any such questions, which will be the case for the majority of estates. However, the issue is relevant if the deceased benefited from a trust until the date of their death.

Examples of trusts for the benefit of the deceased

An overview of the types of trust from which the deceased may have benefited during their lifetime:

1. An “interest in possession trust”, where the deceased had a right to income from trust assets (such as rent or interest on savings accounts), received regular payments or lived in a house which was a trust asset for free.
2. An “immediate post-death interest trust”, a trust set up for the benefit of the deceased on the death of someone else, either by will or intestacy.
3. A “disabled person’s interest”, set up for the deceased if he or she was disabled.
4. A “transitional serial interest”, set up between 22 March 2006 and 5 April 2008.

Further guidance on these trusts is available from HM Revenue & Customs (see question 4).

One trust worth less than £150,000

If the deceased benefited from just one trust, and the value of the assets in that trust are less than £150,000, it can be included on form IHT205 (Return of estate information), assuming the estate is non-taxable. The relevant questions are 4, 9.3 and 10.3.

If you are confident that this is the case, and you are able to describe the trust adequately, there may be no need to seek professional assistance, though you may wish to do so.

Any valuations should be undertaken in conjunction with the trustees of the trust.

Professional assistance

In all other cases, the trust or trusts must be declared on form IHT400, the full inheritance tax account, whether or not the estate is taxable. Consider seeking professional assistance from a solicitor or other probate/trust expert.

Winding up or continuing the trust

In the situation described on this page, the deceased was not a "trustee", but was a "beneficiary". The responsibility for winding up or continuing the trust does not lie with the personal representatives of the deceased but with the trustees of the trust. The personal representatives' primary task is to value the trust assets.