Chris Gladman’s letter last week raises some important issues. It should be appreciated that HM Revenue & Customs has not stated that bare trusts for minors are settlements and thus within the inheritance tax regime. HMRC’s view is that it is arguable that a bare trust for a minor would be a “trust to accumulate the whole or part of any income”. If that were the case, then a bare trust for a minor would fall within the definition of a settlement and there could be unwelcome IHT implications.
HMRC, to its credit, has stated that it is considering the position before issuing final guidance. Such guidance would be advisory in nature and a court hearing would be needed to establish the correct analysis.
A bare trust is a trust where the beneficiary is absolutely entitled to the trust fund. This entitlement cannot be enforced where the beneficiary is unable to enforce the entitlement due to insufficiency of age or lack of mental capacity.
Absolute gifts to minors are unaffected – no trust is involved – although it will be appreciated that a minor will have very great difficulties dealing with financial assets.
Gerry Brown Scottish Life International, Edinburgh
Scottish Life International,