Personal injury and disabled persons trusts

Personal injury trusts

For most people, a bare trust is the most appropriate type of trust. The injured person retains a large degree of control in a bare trust and the trust is tax neutral. If the person changes their mind later, the bare trust is also easiest to unravel.

Precisely because of the control that a bare trust gives to an injured person, some people will want to opt for a different type of trust because they fear what they might do if they had that control.

The different types of personal injury trust and how to select the most appropriate type are discussed in this Practice Note. It also explains how personal injury trusts can be used to ring fence compensation payments from assessment for means tested benefits and it explains the duties and powers of trustees of a personal injury trust.

See Practice Note: Personal injury trusts.

Tax and the personal injury trust

This Practice Note provides an overview of the inheritance tax (IHT), income tax and capital gains tax (CGT) treatment of the main types of trust used as

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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