TRUSTS

Trusts with a Vulnerable Beneficiary

On the death of a beneficiary of a qualifying vulnerable beneficiary trust there is a deemed disposal and re-acquisition at market value of the settled property by the trustees, but there is no charge to capital gains tax, provided the beneficiary had an entitlement to the income of the trust. Legislation will be introduced in Finance Act 2014 to remove the requirement that the beneficiary had to have an entitlement to the income of the trust. These changes will apply for deaths occurring on or after 5 December 2013. The effect of this change is to apply the same capital gains tax treatment to property within a vulnerable beneficiary trust where the beneficiary has no interest in possession in the trust property as is available where the beneficiary does have an interest in possession. Furthermore, from 6 April 2014, the range of qualifying vulnerable beneficiary trusts will be extended. The meaning of ‘disabled person’ is extended from 6 April 2014 to include those in receipt of the mobility component of disability living allowance at the higher rate, or the mobility component of personal independence payment at either the standard or enhanced rate.