Estate duty on settled trust corpus limited by retained life interest and valid inter vivos renunciation of income share

A settlor's retained life interest in her own settled 50% share caused that share to be deemed to pass on death under the estate duty settlement provision. However, a later inter vivos deed of renunciation validly allocated 35% of the remaining settlor's 50% share to charitable beneficiaries, so only the balance of that share was includible in the estate. The arrangement was treated as an immediate relinquishment of a definite income portion, not a mere annuity from residue. Accordingly, the whole trust corpus was not chargeable to estate duty; only 82.5% of the corpus was includible in the deceased's estate.

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Issues: Whether, on the facts of the settlement and subsequent renunciation deed, the entire trust corpus was chargeable to estate duty, or only the portion attributable to the deceased's own settled share together with 65% of the remaining settlor's share.

Analysis: The trust was treated on the admitted footing that each settlor had brought in 50% of the corpus. In relation to the deceased's own 50% share, she had reserved a life interest in the income under the original settlement, so that share fell within the deeming provision governing settlements where a life interest is reserved. In relation to the other 50% share, the later deed of modification and renunciation of 24 November 1954 effected an inter vivos relinquishment of 35% of the income in favour of the charitable beneficiaries, leaving only 65% of that share for the deceased's enjoyment at her death. The arrangement was not treated as a mere annuity payable out of the residue, but as an immediate allocation of a definite portion of income to the charity.

Conclusion: The entire trust property was not chargeable to estate duty. Only 82.5% of the trust corpus was includible in the deceased's estate, namely 50% representing her own settled share and 32.5% representing 65% of the remaining 50% share.

Ratio Decidendi: Where a settlor retains a life interest in a settled share, that share is deemed to pass on death under the statutory settlement provision, but a prior inter vivos renunciation of a definite part of the income in favour of another beneficiary excludes that portion from the property passing on death for the general charging provision.

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