IHTM42808 - Special trusts: treatment of existing Accumulation & Maintenance (A&M) trusts after 6 April 2008

Revised requirements 

Special trust treatment under IHTA84/S71 can still apply to a pre-22 March 2006 settlement as long as the conditions continue to be satisfied & it is not a trust for a bereaved minor (TBM).바카라 사이트¯ However, from 6 April 2008 the beneficiary must take the trust property absolutely at the age of 18.바카라 사이트¯Trustees have until 6 April 2008 to alter the trusts accordingly, if they have the power, FA06/SCH20/para3. The relevant quarters start from the date of conversion. 

Alternatively, the trustees could convert the trust to a TBM, or an 18-to-25 trust before 6 April 2008.   

Implications for trusts not modified 

If the trustees do nothing before 6 April 2008, the consequences depend on the beneficiaries바카라 사이트™ rights under the trust.바카라 사이트¯Â Â 

1)  If a beneficial interest in possession (IIP) already existed at 22 March 2006, that property can be either a TBM from this date, or a continuing IHTA84/S49 beneficial IIP. 

2)  If the trust is not a TBM and the beneficiaries are entitled to take the trust property absolutely at 18, then the A&M trust continues to qualify under IHTA84/S71.  

  • There will be no ten-year charge and no charge to tax when the beneficiaries take the trust property absolutely at 18, IHTA84/S71 (4).  

3)  If the beneficiary attains a beneficial IIP between 22 March 2006 and 6 April 2008, the trust can become an age 18-to-25 trust as long as the trust provisions fall within the default definition below, or are amended to comply with rules for an age 18-to-25 trust.바카라 사이트¯Â Â 

If the beneficiaries are entitled to an absolute interest at an age no later than the 25th birthday, and all are entitled to all the income of their portion (or no-one else is) then the trust is now an 18-to-25 trust from 6 April 2008.바카라 사이트¯Â Â 

  • There is no flat rate charge on this conversion, FA06/SCH20 /para2 (5). 

  • There will be a charge when the beneficiary attains the specified age, which is based upon the amount of time since their 18th birthday, IHTA84/S71E. 

Property to which a beneficiary is already entitled to a beneficial interest in possession at 22 March 2006 cannot be converted into an age 18-to-25 trust, IHTA84/S71D(5)(c)(i). 

4)  In all other instances, the trust joins the normal discretionary/relevant property trust regime as from 06 April 2008 (assuming that IHTA84/S71 continued to apply throughout the period before then).바카라 사이트¯Â Â 

  • There is no Inheritance Tax (IHT) charge on the property becoming relevant property on 6 April 2008, FA06/SCH20 /Para 2(5). 

  • The trust is however then subject to the usual ten-year anniversary (TYA) and proportionate charges on relevant property. 

Trusts now relevant property:바카라 사이트¯ (Principal charge TYA) 

  • The TYA is calculated using the original start date of the trust.  (IHTM42221)
  • Previous lifetime cumulative total (PLCT), related settlements and non-relevant property cumulate as usual. 
  • The property in the trust is treated as relevant property from 6 April 2008.바카라 사이트¯Relief against the TYA charge is available for the period before this date when the assets were not relevant property. (IHTM42088)

Trusts now relevant property: Proportionate charge on dispositions after 6 April 2008 but before the next TYA 

The rate will be calculated under IHTA84/S68 or S69.바카라 사이트¯Any PCLT, related settlements or non-relevant property cumulate for rate as usual. 

There will be a reduction to the rate to account for the period before 6 April 2008 that the property was not relevant property.바카라 사이트¯(IHTM42116) 

a)  disposition before the first TYA 

The rate is based on the value of all the property which became comprised in the settlement before the disposition (including both relevant and non-relevant property) and property in any related settlement at commencement, IHTA84/S68(5).바카라 사이트¯Â Â 

b)  disposition after the first TYA 

Where a TYA of the trust would have occurred before 6 April 2008, there was no relevant property at that date, and the cumulative historic value of non-relevant property may be very low.바카라 사이트¯There may not therefore have been an effective tax rate on that event to look back to.바카라 사이트¯It may seem that there is accordingly no rate of tax on the disposal. 

However, the property becoming relevant property on 6 April 2008 is treated as an addition under IHTA84/S69 (2)(b).바카라 사이트¯In effect, the rate will be based on the value of the trust at 6 April 2008, though the IHT threshold at the date of disposal applies.Â