vulnerable beneficiary

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A beneficiary who falls within one of three categories: (1) a person who by reason of mental disorder is incapable of administering his property or managing his affairs; (2) a person in receipt of either attendance allowance or of disability living allowance at the highest or middle rate; (3) a person under the age of 18, at least one of whose parents has died. The Finance Act 2005 (s 23–45) introduced a new system for taxing income and capital gains arising in a fund held on trust for such a beneficiary. Tax is calculated as if the income and gains had been received by the beneficiary, regardless of whether any payment is made to him by the trustees. In order to qualify for this treatment, no income arising to the trustees can be paid to any person who is not a vulnerable beneficiary as defined by the Act.

Subjects: Law.

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