I am advising the trustees of a relevant property trust where the settlement deed contains the following wording:
‘the Trustees may at any time during the Accumulation Period in their discretion accumulate the income by investing it in any investments authorised by this Deed or by law and […] shall hold such accumulations as an accretion to capital’.
The trustees wish to make an accumulation of income primarily for tax reasons (there is a ten year anniversary approaching). The trust income is currently held in a bank account together with some capital cash and, at least in the short term, the trustees would prefer to make the accumulation by signing a resolution to accumulate, and then showing a transfer from income to capital in the trust accounts. The trust does have an investment portfolio, but the trustees have no current plans to invest the accumulations in this portfolio, although they may do so eventually.
I would normally consider it sufficient to accumulate income in this way (i.e trustees resolution + transfer to capital account on the trust accounts). However, I note here the requirement in the trust deed to accumulate income ‘by investing’. There is no definition of ‘investing’ in the trust deed and arguably one can ‘invest’ money in a bank account. However, I don’t find the position clear - has anybody come across this?