I am dealing with an estate where the deceased owned a number of properties as tenants in common with a third party. His interest in the properties passes under the terms of his Will to his three children, who are also his executors and trustees. The third party wishes to buy the deceased’s interest in one of the properties from the estate but does not have cash available to do so. Instead, they are offering their interest in one of the other jointly held properties and a further property which they hold in their sole name as consideration, with a cash balance. The executors are happy to agree to this, with one wishing to have the former jointly owned property appropriated to them as part of their share in the estate, the other wishing to take the ‘new’ property as part of their share and the third preferring to receive cash. Conveyancers have been instructed to look at how the transactions should be structured. There are cash legacies in the Will that would not be covered if the interest in the estate property were to be appointed out to the residuary beneficiaries.
The Will includes the standard STEP provisions (2nd Edition) only. Do these cover the proposed transactions if the property remains within the estate? Do I need to be concerned about self-dealing? I am conscious that there will also be Stamp Duty and CGT considerations and should be grateful for any guidance or comments in this respect.
In this particular instance, as the executors and trustees are also the only persons entitled to the property interests, the “rule” in Saunders v. Vautier will apply, so that they can make such arrangements as they agree between themselves. Even if S v.V did not apply, the rule against self-dealing would be displaced by the STEP Standard Provisions (2nd Edition) clause 9.4.2 if the 3 children were the only executors appointed under the will
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Sarah I am confused by your statements “His interest in the properties passes under the terms of his Will to his three children” and “There are cash legacies in the Will that would not be covered if the interest in the estate property were to be appointed out to the residuary beneficiaries”.
Surely, if the properties passed as a specific legacy to the children this would take precedence over cash [pecuniary] legacies? Whilst if the properties form part of residue, payment of the cash legacies would take priority - and the children would have to introduce sufficient cash to pay such legacies and other debts/expenses - with potential added complications. Is this your concern?
You are right in thinking that the interest in the properties passes to the children as part of the residue. One of my concerns is whether it would be possible to appoint out the interest in the properties to obtain the benefit of the CGT saving that this would provide but still retain a lien of some sort to cover the legacies.