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In the middle

06 August 2013
Issue: 4414 / Categories: Forum & Feedback , Income Tax , Inheritance Tax

The life tenant of a trust created by his late wife’s will is a higher-rate taxpayer and wishes to assign the income to his new wife, a basic-rate taxpayer

A client of ours (Mr A) is the life tenant of a will trust created by the terms of his late wife’s will (ie an immediate post-death interest) and the capital therefore forms part of his estate on his death.

Mr A has now remarried; he is a higher-rate taxpayer so any taxable income from the trust will be liable at higher rates. His new wife is only a basic rate taxpayer and he would like to assign his interest in the income to his wife to take advantage of this. Is he able to do this and does he need the permission of the trustees?

If Mr A can assign his interest will the income still be treated as his own or will it be treated as his wife’s for income tax purposes?

For inheritance tax purposes will the capital value of the assets remain in his...

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