Interest in Possession Trusts

What is an Interest in Possession Trust?

An Interest in Possession Trust is one where the beneficiaries are entitled to all income of the Trust, less expenses, and trustees must pass this income over promptly.  The beneficiaries receiving the income, however, do not often qualify to receive the capital as this goes to different beneficiaries depending on the terms of the Trust. 

Interest in Possession Trusts and Income Tax

The trustees are responsible for the payment of income tax arising on the income of the Trust and the rates of income tax do vary. 

Interest in Possession Trusts and Capital Gains Tax

Where a capital gain arises in a Trust it is the responsibility of the trustees to pay the necessary capital gains tax.

Interest in Possession Trusts and Inheritance Tax

Sometimes inheritance tax is due when the assets are first put into the Trust, on the 10th anniversary of the Trust, when assets are taken out of the Trust or when the Trust ceases to exist.

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