Will trust for minor with contingency

Trust with Contingency

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A minor (4)  has been left a % share of assets ( money)  in a will, contingent on her attaining the age of 21. Should she not reach 21 her share reverts to the other beneficiaries. No entitlement to income has been specified. The solicitor handling the probate is  adament that her share can  be held in a Bare Trust, though HMRC cites  this exact example as "not a Bare Trust" . Is this therefor a Disgretionary trust? 

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By Marion Hayes
23rd Sep 2016 12:58

The solicitor may term it a Bare Trust but HMRC will look on it as a Trust liable to the full trust rates.
The income is added to the capital, and tax pool rolls up each year, until someone becomes entitled to the underlying asset. Then it is distributed and tax credit given along with the capital distribution.

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By D1zzy
23rd Sep 2016 13:50

Thanks I should perhaps have added that the will includes the standard clauses with regard to Sections 31 and 32 of the 1925 Trustees Act. So as I understand, the Trustees have power to distribute both income and capital. When you say it is liable to "full trust rates" is that as per laid down for a disgretionary trust?

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By Marion Hayes
23rd Sep 2016 21:22

Yes - although it is possible that having the discretion to distribute may change matters.
Who do they have the discretion to distribute to?

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By D1zzy
23rd Sep 2016 21:41

Sorry "distribute" was probably the wrong word. By virtue of clauses S31 and S32 I belive they can withdraw income and capital for the benefit of the minor beneficiary. But thanks, I just wanted to confirm that this should indeed be a disgretionary trust.

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