Trusts and Inheritance Tax

Accumulation and maintenance trusts

Produced by Tolley
  • 23 Mar 2022 10:38

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Accumulation and maintenance trusts
  • What is an accumulation and maintenance trust?
  • Inheritance tax privileges of A&M trusts
  • Qualifying conditions for an accumulation and maintenance trust
  • A&M trusts - the
  • changes
  • A&M trusts after
  • The effect of
  • changes on beneficiaries of different ages
  • Income tax
  • More...

Accumulation and maintenance trusts

What is an accumulation and maintenance trust?

An accumulation and maintenance (A&M) trust is a particular type of settlement intended to make provisions for children and young adults up to the age of 25. The key feature is that trustees are given discretion over how to use the income for the benefit of the child up to a specified age. They may accumulate it to augment the child’s capital entitlement, or they may apply it for the purpose of maintaining the child. Income accumulated in early years may be spent in later years when the child is older. The child becomes entitled to the income as it arises when he reaches the age of 18, or at a later age if the trust instrument so provides.

Typically, a beneficiary has a future entitlement to a fixed share of the trust fund and the income arising on it. However, trustees often have the power to vary the allocation of the total income among beneficiaries before they gain an interest in possession. They may also have the power to advance or re-allocate capital. Once the beneficiary gains an interest in possession, his interest in the underlying capital becomes fixed. Usually, it will be paid to him at a specified age, but in some A&M settlements the trustees retain control of the capital for the duration of the trust.

A&M trusts enjoyed privileged inheritance tax treatment between 1975 and 2006, and became a popular way of making provision for children and

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