Accumulation of income

[beckied]

If income accummulated within an interest in possession trust is added to capital is this a chargeable lifetime transfer by the beneficiary? If so does a portion of the trust become settlor interested?

[AvocadoK]

Hi Beckied
What a horrible question! No wonder no-one has answered it yet.
My initial reaction is that the trustees cannot have the power to accumulate income, what with it being an IIP trust. If they pay it to the life tenant, who then pays it back, then you have got two settlements going on in the same trust, one being settlor interested, as you say. There is no loss to his estate if he is the only life tenant, so the value of the chargeable transfer would be nil. I think.
Regards
David

[maths]

Agree with DavidBen's opening comment!!

However not sure i agree with his other comments.

If the trust provides a life interst to a beneficiary but the trustees have an overriding discetionary power to accumulate the income then for IHT no interest in possession subsists and the trust falls in the relavant property regime (ie 10 year charges etc).

The exercise of the power does not give the beneficiary any IHT charge.