Employee benefit trusts: conditions for relief: power capable of benefitting non-qualifying beneficiaries
Without altering the trusts
The provisions of IHTA84/S86(1) require that the settled property be held on trusts ‘which do not permit any of the settled property to be applied for the benefit of’ anyone other than the persons described in sub-paragraphs (a) and (b).
So if the trustees can allow a non-qualifying beneficiary to receive some benefit under the trust, without either altering the trusts or exercising a power of appointment by deed, the provisions are infringed and IHTA84/S86 will not apply.
Examples of this would be where the trustees can:
- make a loan at less than a commercial rate of interest to the company or
- allow any person to occupy trust property rent-free.
But providing interest free loans or rent-free occupation for employees who are qualifying beneficiaries would not infringe the provisions, unless the employee is also a participator in which case there will be a charge under IHTA84/S72(2)(b) - see IHTM42982.
Legal personal representatives
If the deceased’s legal personal representatives (LPRs) are included within the definition of the class of beneficiaries this will infringe IHTA84/S86. This is because the LPRs would have to distribute the funds in question according to the deceased’s Will or intestacy. So, the recipients would not necessarily be qualifying beneficiaries.