Our client is the sole beneficiary of his mother’s Will, and is considering using a Deed of Variation to pass funds to his minor child. We are weighing up whether or not to use a trust to hold the funds - the client would like to ensure that income tax is paid at the child’s rate rather than his own rate.
Normally if a parent creates a bare trust (or any kind of trust) which pays income his minor child, the income would be taxed at the parent’s rates under the settlor-interested rules. The client hopes to avoid this.
Is this avoided by using a DoV so that the trust is effectively established under the mother/grandmother’s Will? Or does this not help because DoVs are only read-back for the purposes of IHT and CGT?