Separate settlements: variations of trusts: instrument of variation of will or intestacy
One situation which has been quite common is where under the will there is a life interesttrust for the spouse of the deceased. For Inheritance Tax reasons this is partly varied sothat there is a discretionary trust up to the amount of the Inheritance Tax nil rate band.In such a case, where the spouse continues to be a beneficiary of the new discretionarytrust, it would often be appropriate to regard this, except for the purposes ofInheritance Tax, as little more than a cosmetic arrangement, particularly if the broadintention is that the bulk of the income should be paid to the spouse. So this would beregarded for Capital Gains Tax purposes as a variation of the original will trust, and notas giving rise to a new separate settlement. The deceased remains the settlor.