Accumulation Settlements

It is natural to want keep some control put in trust for your children so they do not blow it all on the “trip of a lifetime” or an ill-conceived business venture.

Up until 22 March 2006 it was possible to establish a special kind of settlement referred to as an “Accumulation and Maintenance Settlement” with tax advantages. We are equipped to advise on settlements like this as there are quite a few still around.

To keep the beneficial tax treatment the accumulation and maintenance settlements have to have the following features:-

  • One or more of the beneficiaries of the trust must become beneficially entitled on or before attaining a specified age not exceeding 18 (this used to be 25 and still can be for some settlements).
  • No interest in possession should be available in the settled property and income accumulated (unless applied for the maintenance, education or benefit of the beneficiaries).
  • There should not be more than 25 years elapse since the settlement was made or alternatively all the beneficiaries should be grandchildren of a common grandparent or children widowers or widows or surviving civil partners of such grandchildren who were themselves beneficiaries but died before becoming entitled.

“Interest in possession” means being able to enjoy the benefits of the settled property currently.

We can advise you on whether the above still apply.

There are certain tax benefits to accumulation and maintenance settlements:-

  • a potentially exempt transfer for inheritance tax (IHT), meaning that there will be no inheritance tax if the settler survived for 7 years
  • not subject to anniversary or exit charges for IHT purposes.