Advice would be welcome on whether this is a bare trust please.
The Settlor created a trust after being injured in a road traffic accident to receive the resulting compensation of £340k. The trust was created in February 2014 and the compensation was settled soon after. The Trustees (Mother and Sister of the Settlor) have purchased an investment property with trust funds that is generating rental income.
The Settlor since the accident has been in receipt of the disability living allowance at the highest rate.
The trust deed defines the beneficiary as the settlor.
The deed specifically states:-
" Absolute interest of the Beneficiary in all income of the Trust Fund
The Trustees may pay all or part of the income from the Trust Fund to or for the education maintenance and otherwise for the benefit of the Beneficiary and any undistributed income shall be held as an accretion to the Trust Fund for the Beneficiary absolutely.
Absolute interest of the Beneficiary in all the Capital of the Trust Fund
The Trustees shall hold the capital of the Trust Fund upon trust for the Settlor absolutely.
Death of the Settlor
For the avoidance of doubt on the death of the Settlor the Trust Fund as to both income and capital shall be transferred to the Settlor’s personal representatives to be paid in accordance with the trust’s powers and provisions relating to the Settlor’s estate. "
S.31 TA 1925 has been excluded.
S.32 applies except (a)
Otherwise the standard STEP provisions (2nd edition) apply.
If this is a bare trust rather than a disabled persons trust or discretionary trust, is the following treatment correct?
- Income tax - income declared by the settlor as it arises and trustees do not file a tax return.
- IHT & CGT - settlor treated as the beneficial owner of the property (not the trustees).
- The special treatment under s.89 IHTA 1984 for trusts set up by disabled persons is not applicable.
- TRS - no requirement to register.
If anyone has seen a similar trust I would be interested to know the benefits for the settlor and the purpose of such a trust.
Thank you in advance.