Tax Treatment of 1969 Trust


#1

I have a trust established in 1969 to benefit a named beneficiary who is described in the trust deed as mentally handicapped.

There is discretion to pay or apply income for the named beneficiary, and to accumulate income as an accretion to capital for 21 years from the creation of the trust. There is also discretion to pay income to person or persons caring for the beneficiary. After the period of 21 years the income can be paid to the beneficiary, or if not paid to the beneficiary then it can be paid to the remaining children of the settlor. After the death of the beneficiary the capital and income of the trust fund is held for the remaining children of the settlor equally.

There is discretion to pay capital to the beneficiary or to any person or institution caring for the beneficiary during the lifetime of the beneficiary.

What is the tax treatment of this trust? My first thoughts are that it looks like a Relevant Property Trust and that income tax would be paid at the rate applicable to trusts. Could it qualify as a disabled persons trust under s89 IHTA? Could the trustees make a vulnerable persons election for the income which is paid to the beneficiary?

Any thoughts would be welcome.

Laura Green
Boyes Turner LLP