Accumulation and maintenance settlements

Accumulation and Maintenance settlements were seen as one of the most potent weapons in the armoury of the tax planner, in the days of Capital Transfer Tax. The legislation for that tax contained no provision for Potentially Exempt transfers. All lifetime gifts would be taxable, not just those made within the seven years before death. Discretionary Trusts were subject to a draconian regime whereby (as now) tax was charged when the settlement was made, every ten years while the settlement remained in force, and finally when property left the settlement, or became subject to an interest in possession or to Accumulation and Maintenance Trusts. The provisions of what is now Section 71 of the IHT Act 1984 appeared to offer the possibility of retaining some measure of flexibility, without what were, originally, the seriously burdensome “periodic” and “exit” charges suffered by discretionary settlements. Even then, it became apparent that careful and intricate drafting would be required if a settlement was both to offer a measure of flexibility, whilst remaining within the strict boundaries set by Section 11 of the IHT Act 1925.