PTP's Tax Tip No 5 ' New income tax election for discretionary trusts

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Q - I have just discovered that I can advise my clients, trustees of a discretionary trust for a disabled minor, of a new election for income tax purposes. It all sounds rather exciting, but I am not at all certain that the income tax advantage is worth the condition of paying the whole of the trust capital out to the beneficiary when he reaches 18 years of age. What do you think?

A ' You are partly right and partly not so right! The election allows the trustees to calculate their income tax liability as if they had adopted the tax persona of the beneficiary, i.e. with allowances and starting/basic rate bands. The requirement to appoint the trust capital absolutely only applies to a trust created for minor orphans under s.35 FA 2005, and is not a condition of trusts for the disabled (s.34 F...

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