Twelve shares

In 1993 John set up a trust for his grandchildren and the value of the ‘settled property’ at that time was £200 000 – cash and shares.

The trust deed stipulated that the capital was divisible equally between the grandchildren on their attaining the age of 18 (deeds of variation were made every time a new grandchild was born and eventually there were twelve).

Trust returns and forms R185 have been completed every year and the ‘rate applicable to trusts’ tax paid as trustees have the power to accumulate income or decide whether to make income available to beneficiaries.

In practice all income available has been distributed every year. On 1 May 2008 the eldest grandchild reached 18 and he was given £30 270 (1/12th of the then total value of the fund of £363 240).

Whilst we assume that the £200 000 left John’s estate...