IHTM42978 | Employee benefit trusts: sub-trusts: allocation other than by way of sub-trusts

Where

• an employee benefit trust (EBT) does not stipulate that an appointment of trust property must be by deed (IHTM42971), and

• the trustees do not formally establish sub-trusts but adopt a more informal means of allocating funds between qualifying beneficiaries,

then whether those funds remain subject to IHTA84/S86 trusts will depend on whether the trustees have as a matter of fact altered the trusts on which the funds were held. The steps taken by the trustees as part of the informal allocation may provide evidence of whether enforceable sub-trusts have been created

If, as a matter of fact, the funds continue to be available for the benefit of all or most employees, then something like simple book entries may not infringe the requirements of IHTA84/S86.

On the other hand if funds are, say, transferred to a separate account from which only the named beneficiary could draw, or where the beneficiary can manage the investments it is unlikely that those funds could then be said to be held on trusts that do not permit the funds to be held otherwise than for the benefit of all or most employees. Indeed it is possible that such steps could be regarded as an appropriation of trust capital and the funds concerned ceasing to be settled property.

Whether an informal allocation of funds breaches the conditions of IHTA84/S86 will depend on the precise facts of each case.