Disabled and vulnerable beneficiary trusts ― uniform definitions

Produced by Tolley
Disabled and vulnerable beneficiary trusts ― uniform definitions

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

  • Disabled and vulnerable beneficiary trusts ― uniform definitions
  • Introduction
  • Special trust provisions for disabled persons and vulnerable beneficiaries
  • Definition of vulnerable beneficiary
  • Definition of a disabled person
  • Qualifying terms of the trust
  • Uniform trust conditions

Introduction

It has long been recognised that special concessions are appropriate where property is held in trust for the benefit of a person who is unable to manage his financial affairs. Broadly, these concessions aim to treat the trust property as if it was owned outright by the individual, instead of applying special trust tax rules to it.

Concessions have been introduced piecemeal with the result that the qualifying definitions and conditions were not consistent and at times contradictory.

Finance Act 2013 introduced amendments across the board to the tax legislation dealing with trusts for disabled persons and other vulnerable beneficiaries.

In summary, the amendments:

  1. updated the definition of a disabled person and applied it to all the relevant provisions

  2. harmonised the qualifying conditions for all such trusts

Special trust provisions for disabled persons and vulnerable beneficiaries

The provisions which are affected by these definitions are:

  1. trusts for bereaved minors ― see the Trusts for bereaved minors guidance note

  2. age 18–25 trusts ― see the Age 18–25 trusts guidance note

  3. disabled person’s interest created on or after 22 March 2006 is a qualifying interest in possession (QIIP)

  4. disabled person’s discretionary interest created after 9 March 1981 is a deemed interest in possession

    Self-settlement on discretionary trust created on or after 22 March 2006 by a person expected to become a disabled person is a deemed interest in possession.

  5. meaning of ‘disabled person’s interest’ includes both actual and deemed interests in possession

  6. disabled person’s interest in possession created after 22 March 2006 is a QIIP

  7. self-settlement on interest in possession trust created on or after 22 March 2006 by a person expected to become a disabled person is a QIIP

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