The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The term 'bare trust' applies to an arrangement where the legal ownership of property is in a different name from that of the person beneficially entitled to it. The person entitled to it has absolute rights to both capital and income, but the legal owner will conduct the management of it. Some of the situations in which a bare trust might arise are described below.
Minors do not have the legal capacity to enter into contract or give a valid receipt. Property which, in equity, belongs to a child must be held in the name of a trustee. Whilst the child is under 18, the trustee, usually a parent or guardian, manages the property according to their own judgment, even though it belongs absolutely to the child. But if the child's rights to the property are not subject to a legal restriction, other than their incapacity as a minor, the child has the right to take possession of the property at the age of 18 and deal with it as he wishes.
This situation will arise where children are given outright bequests in a Will, not subject to an age contingency. It is also very common with children's savings accounts funded by grandparents and other relatives. Parents may set aside funds for children in a bare trust to obtain a legal separation from their own assets. In contrast to the income tax position , property in a bare trust belongs in a child's estate for IHT purposes even where it derives from a living parent.
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login