Taxation of age 18–25 trusts—IHT
Produced in partnership with Paul Davies of Clarke Willmott

The following Private Client practice note produced in partnership with Paul Davies of Clarke Willmott provides comprehensive and up to date legal information covering:

  • Taxation of age 18–25 trusts—IHT
  • Inheritance tax concession
  • Qualifying conditions for an age 18–25 trust
  • Computation of the exit charge
  • Alternative flat rate charge

Taxation of age 18–25 trusts—IHT

The special category of age 18–25 trusts was introduced by Finance Act 2006 (FA 2006) to offer some compensation for the loss of old style accumulation and maintenance (A&M) trusts. The A&M regime offered exemption from inheritance tax (IHT) charges on trusts in favour of children and young adults up to the age of 25. The conditions were fairly narrow and precise but nevertheless enabled any settlor, both in lifetime and on death, to make provision for young people. See Practice Note: Accumulation and maintenance trusts—IHT. After FA 2006:

  1. existing A&M trusts could retain their IHT privileges only if beneficiaries became absolutely entitled to trust assets by the age of 18

  2. new A&M style trusts could only be created for a child under 18 whose parent had died—see Practice Note: Taxation of trusts for bereaved minors—IHT

The age 18–25 provisions extend both of these categories to retain some concessions for beneficiaries up to the age of 25.

Inheritance tax concession

Where property is held in a trust which qualifies as an age 18–25 trust, there is no IHT charge whilst the beneficiary is under the age of 18 as a result of the following events:

  1. the beneficiary becoming absolutely entitled to the trust property

  2. the death of the beneficiary, or

  3. the trust property being paid or applied for the benefit of the beneficiary


Popular documents