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Value of retained rights

23 January 2012
Issue: 4338 / Categories: Tax cases , Inheritance Tax
Watkins and another (executors of Watkins deceased) (TC1582)

In 2004 the deceased who was 89 years old at the time created a discounted gift trust effected by an estate planning bond.

She settled the trust on her two sons the appellants and received quarterly payment of 10% a year on the bond value that amounted to £4 250 a quarter or £53 273 over the actuarially reckoned life expectancy of the deceased of 3.1 years.

She died in March 2006.

HMRC issued a notice of determination valuing her retained rights in the settlement to one quarter’s income.

The appellants argued the commercial value of the income stream should be based on the quarterly payments over 3.1 years using an interest rate of 5% amounting to just over £49 000 which and would be its value if sold on the open market for the purposes of

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