 |
 |
|
|
An Accumulation and Maintenance Trust is one in which the beneficiaries will become entitled to the property or at least the income when they reach a certain age (no more than 25). The trustees can use the income for the maintenance of the beneficiary before the date on which that beneficiary becomes entitled to the property or to an interest in possession in that property.
Trustees of an Accumulation and Maintenance Trust are given power to 'accumulate' the income of the Trust until a certain date, at which time the beneficiary, or beneficiaries are entitled to the property of the Trust or to the income arising from that property.
In England and Wales, the beneficiary (unless the terms of the Trust say otherwise) becomes entitled to the income from the property held in the Trust when he or she reaches age 18 and an Interest in Possession Trust is created at that point.
The position in Scotland is different, as there is no equivalent entitlement to the income of the Trust at the age 18. However, Scots Law limits accumulation periods so Accumulation and Maintenance Trusts will often end when the beneficiaries reach the age of majority.
In the period during which the trustees can accumulated income, the trustees and beneficiaries are taxed in the same way as in a Discretionary Trust, as described above.
When the accumulation period ends, the tax treatment depends on what happens to the Trust property.
For example, if
an Interest in Possession Trust is formed, then the tax treatment for trustees and beneficiaries of Interest and Possession Trusts will apply
it becomes a Discretionary Trust, then the tax treatment for trustees and beneficiaries of Discretionary Trusts will apply
the Trust comes to an end, and the trustees pass the Trust property to the beneficiaries, the trustees may have to pay Capital Gains Tax on any gain arising at that point, but will not have any liability on future income or gains