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Standard alert on deadline for trust changes

Standard Life is highlighting that certain types of trust will have just one year left for trustees to consider making changes to them.

In last year’s Budget, the two main types of trust affected were interest in possession trusts and accumulation and maintenance trusts.

To allow trustees of these trusts time to consider their options, a two-year transit-ional period was created which expires on April 5, 2008.

The rules are very different for IIP and A&M trusts, which Standard is flagging in the run-up to the end of the tax year.

IIP, or flexible trusts, typic-ally used to hold investment bonds and insurance policies, now only have one more year for trustees to determine who the named beneficiary will be.

Estate planning specialist Julie Hutchison says: “The great opportunity is for trusts where the trust interest can now be passed down to the next generation. This would be ideal where, for example, the existing IIP beneficiary has no requirement for the trust assets and wants his own children to benefit instead. Taking action to change the beneficiaries before April 5, 2008 means that the trust is not brought into the new regime.”

But if A&M trusts are not altered in a certain way prior to April 5, 2008, the new regime will apply to them from April 6, 2008 onwards.

The main choices for these trustees are to change the age at which the beneficiaries receive capital to age 18, change the age at which the beneficiaries receive capital to age 25 or do nothing because either the value of the trust means that no IHT will arise anyway or the value of the trust is significant and it would be inappropriate to reduce the age at which beneficiaries get funds.

Trustees could decide on this basis that it is better to pay the maximum 6 per cent IHT liability and for the beneficiaries to enjoy the asset protection which the trust gives.

Hutchison says: “A&M trusts were normally bespoke trusts written by a law firm and these were not mainstream trusts for life offices to offer. However, trustees of A&M trusts should keep their eye on the calendar as they only have one year left to consider whether to alter the capital vesting age of the beneficiaries.”


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