When does a trust come to an end

By Tolley in association with Malcolm Gunn

The following Trusts and Inheritance Tax guidance note by Tolley in association with Malcolm Gunn provides comprehensive and up to date tax information covering:

  • When does a trust come to an end
  • Termination documentation

It is not permissible to tie funds up in trust in perpetuity. All settlements governed by United Kingdom law must finally vest absolutely in the beneficiaries within the given timescale. Over the years, various acceptable timescales have been prescribed by law. Currently under the Perpetuities and Accumulations Act 2009 a period of 125 years applies for trusts created on and after 6 April 2010. At the end of this period interests must vest. The trust may of course continue.

Under virtually all modern trusts, the trustees have power to end the trust at an earlier time, this normally being by exercising a 'power of appointment' or a 'power of advancement'.

If all the beneficiaries of a trust are alive and are of full age they can together bring the trust to an end under the rule in Saunders v Vautier. This rule enables them to partition the funds between themselves as they may agree. However, until the beneficiaries take any such action, the trust remains of full force and effect.

Saunders v Vautier 49 ER 282 (subscription sensitive)

If there is only one possible beneficiary now remaining under a trust, the trust is at an end for tax purposes. As regards capital gains tax, the beneficiary is absolutely entitled as against the trustees. This applies even if the beneficiary is under age, so long as he or she has a vested inte

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