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Absolute
Trusts, or Bare Trusts
The beneficiaries are named in the trust deed or will.
They have the right to income and capital immediately
and, as soon as they are 18, they have the power to
demand the contents of the trust from the trustees.
The beneficiaries and their shares cannot be changed.
Accumulation
and Maintenance Trusts
These are trusts for children. They are discretionary
trusts with preferential treatment for inheritance
tax purposes. The donor doesn't have to specify exactly
what each child will receive. The trustees can dispense
money as they see fit for the education, maintenance
or benefit of the children. Once the children reach
the age of 25, they must at least have the right to
income from the trust.
Discretionary
Trusts
The trustee has absolute discretion over who benefits
from the trust from amongst a class of beneficiaries
specified by the settlor. However, a gift into such
a trust is immediately chargeable to inheritance tax
at 20% if the gift takes the settlor over his or her
'nil' rate band. The Inland Revenue can continue to
levy charges every 10 years.
Interest
in Possession Trusts
Flexible Power of Appointment. The trustees have discretion
over who benefits from the trust, within classes of
beneficiary selected by the settlor at the outset.
But the income generated by anything in the trust
is automatically given to specified
beneficiaries.
Life
Interest Trusts
The specified beneficiary is entitled to receive for
life the income generated by the trusts' investments,
but the capital will pass (on death) to the next set
of beneficiaries - possibly children.
article
updated 04/2006
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