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Pre-2006 A & M Trust

Pre-2006 A & M Trust

An A & M Settlement was created in 1992 for four beneficiaries, grandchildren of the Settlor.

The trustees now wish to transfer the assets to the beneficiaries and wind up the Settlement.

As was typical, the beneficiaries were given a right to income with effect from their 25th birthdays, with the Trustees given a right to hand over the capital absolutely when they see fit, subject to (what was then) the 80 year limit.

The beneficiaries were all born in the 1970s and turned 25 before the 2006-2008 changes in Trust rules.There have been no changes in the structure or the beneficiaries since inception.

Am I right, therefore, in thinking that the Settlement in question should now be regarded simply as a pre-2006 Interest in Possession Trust for CGT/IHT purposes? This would mean that there would be no Section 260 hold-over relief on the transfer of the assets to the beneficiaries, so there might be CGT to pay. On the other hand, we would not be looking at an IHT exit charge?

Thanking you in advance.

TG

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By LyneT
09th May 2012 17:48

Yes, this is now a IiP trust.

There will be no exit charges and so there is no hold over relief (no immediate charge to IHT) unless assets are business assets.  So CGT payable on appointment to beneficiaries.

These were sometimes called "time bomb trusts" for the exact reason you outline.

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