If at the date of death of the testatrix, the beneficiary had all parents (including any step parent) living, the trust will be a relevant property trust. An exit charge will arise on their 25th birthday and hold over relief would be available to avoid the CGT charge then arising under s.71 TCGA 1992 being assessed on the trustees. However, if the 25th birthday falls on, or within 3 months of the 10th anniversary of the death of the testatrix, holdover relief will not be available (the “Frankland trap”).
If, though, at the date of death of the testatrix, one or more of the beneficiary’s parent or step parents were dad, the trust will be an 18-25 trust, not a relevant property trust. The trustees will still be liable for CGT on the deemed disposal under s.71 TCGA 1992 although, as a charge to IHT will still arise on the beneficiary attaining 25, hold over relief can be claimed. However, unlike a relevant property trust, the “Frankland trap” does not apply to an 18-25 trust and so there is no risk of losing the opportunity to claim hold over due to the date of the beneficiary’s birthday falling in the wrong time period.