There can be confusion on how to deal with a nil-rate band discretionary trust (usually created for IHT purposes). In particular, there can be confusion because an individual holds the property in his or her sole name, but in different capacities (eg as the surviving registered proprietor, as trustee of a trust of land, and/or as PR of the deceased joint proprietor).

Tax law often allows the ‘post-death severance’ of a beneficial joint tenancy. However, there can be no retrospective severance under property law. For instance, if H and W hold as joint tenants and H dies, then it is a matter of property law that W will have become the sole legal owner and there is nothing for her to sever. What W can do, however, is to create a new trust of land in which W declares that she holds on trust for W and the PRs of H. If W does declare a trust, then W will have to apply for a restriction using Form A (if the trust contains limitations on the trustee’s powers, then W must also apply for a restriction in Form B). At the same time, A’s PRs, who now hold an interest under the trust, may apply for a restriction in Form A (and Form B if there are limitations on the trustee’s powers). If the trust contains consent requirements then PRs can apply for a restriction (using Form N or Form Q, depending on the circumstances). At the same time, if a standard Form A restriction has not been registered, the trustees may decide to apply for one in order to comply with their obligations as trustees (they may apply for a restriction in Form B if there are limitations on their powers, whilst a Form N restriction can be entered if the application is made with the consent of W). Also, if the trustees fail to apply for a Form A restriction, it is possible for any beneficiary to do so.

Once the Form A restriction has been entered, then W cannot sell or charge the legal estate as the sole registered proprietor. W can effectively charge the legal estate held in the trust, if W appoints another trustee to act with her. Also, W can charge her beneficial share (since that is not a charge on the land, it will not be registered and cannot be noted).

It is a complex area and one that cannot be adequately summarised here. Instead, refer to the excellent LR Practice Guide 70, issued in December 2009.