Inheritance Tax Act 1984 section 71A

Trusts for bereaved minors

Section 71A provides a favourable inheritance tax treatment for trust property held for the benefit of a child who has lost a parent, provided certain conditions about entitlement and use of the property are satisfied.

• The section applies to property held on trust for a bereaved minor, whether under intestacy rules, a deceased parent's will, or a criminal injuries or overseas terrorism compensation scheme, but not where a disabled person's interest exists
• To qualify, the trust must ensure the bereaved minor becomes absolutely entitled to the property, its income, and any accumulated income on reaching age 18, and that while under 18, any property or income applied for a beneficiary is applied for the minor's benefit
• Trustees having standard powers of advancement will not disqualify a trust, and small payments to others are permitted within an annual limit of the lower of £3,000 or 3% of the maximum value of the settled property in each tax year running from 6 April
• The Treasury has the power, subject to House of Commons approval, to amend the annual limit and specify circumstances in which the small payments exception does or does not apply

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