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10 July 2018
Tax consequences of transferring assets from one discretionary trust to another.
A discretionary trust was established in 2003 with a perpetuity period of 80 years and an accumulation period of 21. Its principal asset is a 38% holding of shares in a family investment company. There is a small cash balance.
The shares have accumulated a significant capital gain.
The class of beneficiaries includes the grandchildren and remoter descendants of the settlor and their spouses. The default trust is for the settlor’s great-granddaughter absolutely who is severely disabled. The trustees are the daughter now aged 74 and granddaughter-in-law.
The settlor’s letter of wishes dated in 2003 directs that:
- the great-granddaughter should be considered the principal beneficiary during her lifetime;
- subject to this the income and capital of the trust should be used for the benefit of the settlor’s grandson and his wife (who is one of the trustees) and their other...
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