I have a trust deed drafted like a bare trust - within the body of the deed it is stated that the capital is to be held on trust for the settlor’s two grandchildren absolutely, and that the trustees may apply the income to or for the benefit of the two grandchildren or accumulate it and add it to the trust fund. However, within the definitions clauses it is also stated “the trust fund shall be held on trust for the two grandchildren in equal shares absolutely until each attains the age of 25 years”.
Would this therefore be considered relevant property?
And would the income be taxed at the grandchildren’s personal rates?
It looks to me that there us a drafting error as, taken literally, the further provisions terminates the grandchildren’s “absolute” interest when each reaches age 25.
It may be that the drafter intended to engraft a trust onto the original gift, effectively deferring vesting until age 25 (relying upon Lassence v. Tierney, 1849) but has got the wording wrong. The direction with regard to income may effectively out the application of s.31 Trustee Act 1925, but will not give the grandchildren an interest in possession.
Yes, I think that for IHT it is a relevant property trust, and for income tax it is a discretionary trust.
However, with regard to the substantive terms of the trust, I suggest a review of the drafter’s instructions would be appropriate as there may be a need for rectification (unless counsel is able to endorse a sensible construction)