Our client has an A&M trust for the benefit of his two children who are both over the age of 25 now. He ultimately wants the assets from the trust to be passed down to his current and future grandchildren and was hoping that his children would agree to set up a new trust with the grandchildren as beneficiaries.
As I understand it under the new rules this trust would be subject to principle and exit charges. Is this correct and are there any ways of getting around it such as varying the terms of the current trust so that the daughters agree that the grandchildren will now be the beneficiaries?
To add another complication our clients solicitor has infomred us that the current trust is due to expire in 2008.
Kerry Hindson
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A&M trust
You mention that the children are over 25. An A&M trust under the pre Budget 2006 rules required the children to become absolutely entitled to the capital at 25 or to have an interest in possession. So not quite clear what the status of the trust you mention is now? Not quite sure what you mean when you say it will expire in 2008? Is the last beneficiary turning 25 then?
Surely this money is now the children's and any new trust would have the parents as settlors which has and has had for many years undesirable consequences such as income treated as that of the parent?
As regards the proposed changes I would think it best to wait until the Finance Act is passed before you take any definitive action since until then the law is not finally settled.