Readers’ forum: Trust transfer

15 December 2015

Issue: 4531 / Categories: Forum & Feedback , Inheritance Tax

The inheritance tax implications of a distribution from a trust.

An 18-to-25 will trust was created in October 2005. The beneficiary is a minor who will be entitled to the capital on becoming 25 in late April 2016. The trust holds property that cost £275 000 and receives rental income part of which has been distributed to the beneficiary. Capital repayments of £14 000 have also been made to help the beneficiary buy a house.

It is proposed to transfer the property to the beneficiary soon. The property has been valued at £300 000. Other funds excluding any income tax liability are less than £25 000. An income payment could be made to reduce this.

What inheritance tax returns are required and should these include the non-distributed income and the potential income tax liability on rents? Presumably the capital gain can be held over because a tax-free uplift is not applicable.

Query 18 703 – Trustee.

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