I5.502 An introduction to A&M trusts

IHT, trusts and estates

I5.502 An introduction to A&M trusts

Division I5.5     Favoured trusts for young people

For updates affecting this Division please see Part I0 Updates

Accumulation and maintenance (A&M) trusts

I5.502 An introduction to A&M trusts

The terminology regarding accumulation and maintenance (A&M) trusts can be confusing.

From a trust law perspective it is still perfectly possible to create an A&M trust. A settlement for 'my grandson subject to him attaining the age of 21' is an A&M trust — the income and capital can be accumulated or applied for his maintenance using either express powers or the statutory powers of advancement under the Trustee Act 1925, s 31, 32. The trust is neither a discretionary trust nor an interest in possession.

However, for tax purposes it will form part of the relevant property regime and the tax treatment will mirror that of a discretionary trust.

When most practitioners refer to 'accumulation and maintenance' trusts they mean the type of trust which, prior to the Finance Act 2006, attracted favourable IHT treatment and, in limited cases, still does.

This Division discuss those trusts which fall into the favourable tax regime and the term 'accumulation and maintenance' or 'A&M' trust will mean just that.

The specific conditions for A&M trusts to arise are discussed later in this Division. However, it will be helpful to first consider the limited circumstances in which A&M trusts will still exist.

A&M trusts post-FA 2006

The Finance Act 2006, Sch 20 introduced significant changes to the inheritance tax treatment of trusts on and from 22 March 2006, and in particular

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