IHTM16067 - Interests in possession: Administrative Powers
A power to withhold income which is administrative rather than dispositive does not affect the existence of an interest in possession.
Examples of administrative powers include:
- a power to pay professional advisers
- a power to pay for the upkeep and repair of a trust property
- a power to take out and keep up a policy of insurance for repairs etc, or
- a power to pay premiums on a life assurance policy designed to cover any claim to IHT on the fund
These expenses are capital expenses, but if the trust deed permits them to be paid out of income then the trustees may do so.
Such payments do not defeat an interest in possession although, as a practical matter, there will be less income to give to the beneficiary. The authority for this is Carver v Duncan [1985] STC 356 (an income tax case).
In Scotland Carver v Duncan does not apply, so the exercise of a power to pay premiums on a life policy may bring an interest in possession to an end wholly or in part. This depends upon the terms of the policy and the trust. You should refer any difficulties to Technical.