Accumulation and maintainanceare a special type of discretionary trust. They are often called A&M Trusts for short.
This type ofexisted primarily to provide at least an income for the settlor’s children and grandchildren until they attained a specified age not exceeding 25.
The way it works is one or more beneficiaries would become entitled to thecapital (or a right to the income in the trust, known as an interest in possession) before they reach the age of 25; and until that time any income was not applied for the maintenance, eduction or benefit of a beneficiary had to be accumulated with the trust; and either all of the beneficiaries had to be grandchildren of a common grandparent (or children/widows/wdowers of such grandchildren if they died before becoming entitled) or not more than 25 years had elapsed since the commencement of the settlement.
During the accumulation period capital could usually be advanced to or for the benefit of the beneficiaries or to pay or apply income for their benefit. This was obviously a favourable position for Inheritance Tax (IHT) purposes.
Following the 2006 Budget the favourable tax treatment no longer applies to property settled into theon or after 22nd March 2006. There was a transitional treatment which applied to existing trusts, but the transitional period ended on 6th April 2008. This means that an Accumulation and Maintenance Trust (A&M Trust) will be charged Inheritance Tax (IHT) in the same way as a discretionary trust, unless it was amended to satisfy the 18-to-25 trust conditions.