My husband's mother passed away a while back and she had a discretionary trust.

It seems to have had a value of just under £100k

My mother-in-law drew £200 per month from it as income.

It was taken out just over ,10 years ago, nearly 11 in fact.

There are three children, my husband being one of them.

What is likely to happen after probate with this, I believe it sits outside the estate for inheritance tax.

Can the holdings in the trust just be transferred to the children?

If they are sold what happens in terms of taxation?

Seem really confusing and we are going through probate, but wanted to try and get a handle on this?

Anyone know, if you do thanks for any help you can give.

It might depend on what the trust held

I think if the trust held an investment bond (Life insurance company issued single premium life insurance policy) any chargeable events would fall back on the settlor of the trust during her lifetime

After the settlors death as Newbie said if segments are assigned the tax is payable on the gain at the assignee rate on encashment. If any gain when added to the rest of their income that year keeps them at basic rate their might not be any further tax liability

A couple of issues/thoughts

1. My knowledge might be incorrect!
2. If it is an investment bond written on a single life the bond will automatically be turned to cash on the death of the sole life assured, 101% of the bid value of the units is paid out so maybe no opportunity to assign segments to low tax beneficiaries
3. If the settlor is drawing from the trust does this make it a gift with reservation so not IHT friendly
4. If the money isn't invested in an investment bond the above is definitely all garbage!

Maybe worth finding out exactly what the trust contains and how it's taxed from a chargeable gains, IHT, income tax point of view, whoever set up the trust might be able to advise

Maybe two things you could do to get the ball rolling

1) Look and see if there is any correspondence from when the trust was set up and the investments put into the trust, if someone like an IFA advised there will be a letter justifying the advice, I guess the same would apply if a solicitor had done the work
2) Work out how the investment are held, are they directly held trusts with an investment house or maybe insurance company ‘bond’ that has been invested in various funds. It matters as the latter doesn’t generate income but chargeable gains