I was somewhat surprised to learn in last week’s Money Marketing that HM Revenue & Customs is looking to tax gifts to an absolute trust for minors as a chargeable lifetime transfer. This appears to misunderstand what an absolute or bare trust is all about.
Trusts are used to create different interests in the same property. A bare or absolute trust exists where there is only one interest and often occur at the end of a prior interest before the trustees can settle tax liabilities, for example, and transfer the assets to the appropriate beneficiaries.
In the case of absolute gifts to minors, trustees are appointed only because there is no legal capacity for the beneficiary to give a receipt for the monies or to otherwise deal with them. If HMRC understands this, on what grounds can they seek to impose a lifetime charge to IHT?
Greyfriars Asset Management,