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In 2010 the husband died, leaving 50% of income generating commercial property asset in an IIP will trust to his wife, income for life to spouse. On her death his 50% is left to daughter absolutely. Husband's estate paid out legacies to sons and remaining NRB transferred to spouse. Fast forward 10 years and the wife dies. Her 50% and the 50% from the IIP will trust are brought into her estate. Her 50% also goes to the daughter.
In the last 10 years, the property has significantly increased in value, such that there is now a very substantial IHT liability. The Trustees for the husband are responsible for the late husband and there is insufficient cash to settle. They are of the view the daughter takes on the full outstanding IHT (quarterly payments etc).
To make it worse, the income on dad's 50% has been received into mum's estate, and the daughter feels this cash is being used to settle mum's legacies (again included to the sons). I suspect the daughter will manage to receive the income from dad's 50%, from for the full period after death. It seems all parties now agree that daughter is entitled to this (although the executors have suggested that this should be used to settle the IHT. The proposal has left a sour taste for the daughter regarding their actions.
The daughter's view is that the beneficiaries of legacies (sons) from 10 years ago should be making a contribution and to the extent that there is insufficient cash, the executors ought not to have made distributions.
The executors' response is that if they hadn't, then if the wife had lived another 20 years, then there could be no distributions until that time. They had no idea that the property would go up in value so much and based on the 2010 valuation there wouldn't have been a problem.
All parties have my sympathies, but what should have happened?
- Were the executors correct to make distributions back in 2010?
- Can rental income received in the administration period be used to settle IHT of mum?
- Is the daughter entitled to just dad's income post mum death, or all of it?
Many thanks
Pip
In the last 10 years, the property has significantly increased in value, such that there is now a very substantial IHT liability. The Trustees for the husband are responsible for the late husband and there is insufficient cash to settle. They are of the view the daughter takes on the full outstanding IHT (quarterly payments etc).
To make it worse, the income on dad's 50% has been received into mum's estate, and the daughter feels this cash is being used to settle mum's legacies (again included to the sons). I suspect the daughter will manage to receive the income from dad's 50%, from for the full period after death. It seems all parties now agree that daughter is entitled to this (although the executors have suggested that this should be used to settle the IHT. The proposal has left a sour taste for the daughter regarding their actions.
The daughter's view is that the beneficiaries of legacies (sons) from 10 years ago should be making a contribution and to the extent that there is insufficient cash, the executors ought not to have made distributions.
The executors' response is that if they hadn't, then if the wife had lived another 20 years, then there could be no distributions until that time. They had no idea that the property would go up in value so much and based on the 2010 valuation there wouldn't have been a problem.
All parties have my sympathies, but what should have happened?
- Were the executors correct to make distributions back in 2010?
- Can rental income received in the administration period be used to settle IHT of mum?
- Is the daughter entitled to just dad's income post mum death, or all of it?
Many thanks
Pip
