Inheritance Tax Mitigation – High Court Fulfils Grandmother’s Plans
Family trusts are commonly used as a means of minimising tax liabilities, particularly Inheritance Tax (IHT), but their intricacy means that mistakes can be made. As one High Court case happily showed, however, such errors can be put right with the benefit of specialist legal advice.
A woman had signed two interlocking trusts by which she hoped to mitigate IHT in respect of her home. She intended to confer an interest in possession on those she wished to benefit from her estate, including her grandchildren. However, the trust deeds did not have the desired effect, primarily because the grandchildren were yet to reach adulthood at the time the deeds were executed.
The Court noted that it was not a case of typographical errors or words having been mistakenly added to or omitted from the deeds. The woman had signed the documents that were put in front of her. However, as a layperson, she had little understanding of the documents’ detailed provisions and had clearly mistaken the legal effect of the words used. Her intentions in executing the deeds were apparent and, in the circumstances, the Court rectified them so as to achieve her objectives.