I am dealing with a Discretionary Settlement made in 2000. The stated accumulation period is 21 years and so expired in 2021. There was a large sum of income still held as at the expiry date and I am not sure if the Trustees ever exercised their power to accumulate (there is no direction to accumulate income undistributed). Could the Trustees still accumulate the income received prior to the expiry of the accumulation period or is it now too late (I suspect the latter)?
My understanding is that the power to accumulate expires on the expiration of the 21 year period. Accordingly, if there is income held by the trustees the day after the 21 year period expires, it can no longer be accumulated.
I further understand that the 21 year period starts on the date of the settlement (or the date of death of the testator if a will trust), so that the power expires at midnight at the start of the day of the 21st anniversary of the creation of the trust. (i.e. settlement date/date of death of testator – 1 January 2000, last date upon which the power to accumulate might validly be exercised – 31 December 2021).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thanks Paul – that’s what I feared.