18-25 trusts favourable tax treatment

[Paula Henderson]

I realise that a TBM has no exit charges, but given that an 18-25 trust has exit charges, what are the tax advantages of such a trust? Why not set up a RPT?

[Anthony Nixon]

I agree. There is rarely any point in deliberately setting out to create an 18-25 trust.

The changes to the IHT rules for trusts made in 2006 are of mind-boggling complexity.

The special rules for 18-25 trusts were introduced at a late stage as the 2006 Finance Bill went through parliament.

It is worth knowing that the exit charge on 18-25 trusts is calculated differently to that on relevant property trusts. It may result in the same charge, but it may be less, particularly as there are no 10 year charges and no charges on any exits while the beneficiary of an 18-25 trust is under 18.

From the point of view of drafting wills, a relevant property trust is usually best. IHTA section 144 allows it to be altered to any other kind of trust within the two years after death, according to what suits the particular circumstances, the assets involved and the age of the beneficiaries.

Anthony Nixon CTA TEP Solicitor
Partner, Thomas Eggar LLP, Southampton and Chichester
anthony.nixon@thomaseggar.com
023 8083 1224