accumulation and maintenance settlement

Quick Reference

A discretionary trust that fulfils three conditions: (1) the terms of the settlement require that beneficiaries obtain an interest in possession at a specified age, not exceeding 25; (2) whilst under the specified age, any income not advanced to the beneficiary must be accumulated; (3) either (a) the period from the creation of the trust to the creation of the interest in possession is less than 25 years or (b) all beneficiaries are children of a common grandparent. Formerly, a transfer of property into such a settlement was a potentially exempt transfer and there was no immediate charge to inheritance tax. However, following the changes made by the Finance Act 2006 (Sch 20) it is no longer important to determine whether or not a settlement satisfies these conditions. Inheritance tax is, in general, charged on the transfer of property into any type of settlement, unless the trust is for the benefit of a disabled person or a bereaved minor. From April 2008 all existing A and M settlements were reclassified for tax purposes as either *18–25 trusts or relevant property trusts.

Subjects: Law.

Reference entries