section 71D trust

England, Wales

18 to 25 trust Also known as a "section 71D" trust (section 71D trust).

A trust for the benefit of a person aged under 25 who will become absolutely entitled to the whole of the trust property on or before his 25th birthday (section 71D, Inheritance Tax Act 1984 (IHTA 1984)).

An 18 to 25 trust has special treatment for inheritance tax (IHT) purposes; it does not suffer any IHT charges until:

• The beneficiary becomes absolutely entitled to the trust property;

• Some of the trust property is distributed to the beneficiary; or

• The beneficiary dies over the age of 18 (but before he reaches the age of 25).

No IHT charges arise under an 18 to 25 trust where:

• The beneficiary becomes absolutely entitled to the trust property before his 18th birthday;

• Some of the trust property is distributed to the beneficiary before his 18th birthday; or

• The beneficiary dies under the age of 18.

To fall within section 71D of IHTA 1984, the trust must also have been created:

• Under the will of a deceased parent (and "parent" includes a step-parent or someone who has parental responsibility for the child under the Children Act 1989);

• Under the Criminal Injuries Compensation Scheme; or

• Before 22 March 2006, by any settlor (during his lifetime or on death), as an accumulation and maintenance trust (A&M trust) under section 71 of IHTA 1984 (before it was amended by the Finance Act 2006), provided that it ceased to qualify as an A&M trust between 22 March 2006 and 6 April 2008 inclusive and has met the conditions for an 18 to 25 trust since that time.

Trusts which qualify as trusts for bereaved minors (trust for bereaved minors), A&M trusts under section 71 of IHTA 1984 (as amended by the Finance Act 2006) or qualifying IIP trusts (qualifying interest in possession) cannot be 18 to 25 trusts.