I have been asked to advise on the CGT consequences in the following scenario. A trust deed gave the trustees a discretion to appoint capital to any one or more of a defined group “by deed or deeds revocable or irrevocable”.
The trustees decided to wind up the trust and wrote to the beneficiaries to set out the intended division of the trust fund, which consisted of quoted investments with unrealised gains.
Being charities the beneficiaries asked that the assets be appropriated to them, according to the indicated division, that the trustees then elect to hold over the gain and then sell as bare trustees, so as to avoid the impact of CGT when the inbuilt gains were realised. The trustees confirmed they would do that.
The trustees went ahead with the appropriation and sale, but failed to execute a deed of appointment first. We have been asked to advise the trustees on whether they can properly elect to have the gain held over and to treat the sales as having been effected as bare trustees, ie was their power of appointment been validly exercised by recording it in writing but not by way of deed?