Speculate, accumulate

23 July 2013

Issue: 4412 / Categories: Forum & Feedback , Inheritance Tax

An interest in possession trust was established by a will and allowed a widow to occupy a property as her main residence for her lifetime. She is now elderly and has moved into a care home. The property has been sold and the proceeds have been invested

I act for an interest in possession trust established by a will which in the past year sold the main residence of the life tenant widow (who is now in a care home) and invested the proceeds in a portfolio of funds.

The investment adviser chose two types of units: accumulation units where deemed income is declared but reinvested increasing the value of the existing units; and units that declare income that buys more units. There are other sources of income which are adequate for the life tenant’s needs and capital growth was considered to be the correct investment strategy for the trust as a whole.

I am now looking at the tax return and wondering how this works for tax. The funds send tax certificates which detail income (for tax purposes). This income is not being paid to the life tenant and consequently...

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