Appointment of AIM shares from deceased's estate to a trust

Trusts Discussion
1

We are administering an estate with a discretionary trust of residue. A separate trust is going to be created for the deceased’s disabled son, and the residue will pass to charity.

One of the assets in the estate was an investment portfolio which included AIM investments. At the executors’ request, this entire portfolio was sold shortly after the death of the deceased.

What I want to know is whether we can appoint the AIM shares (which have already been sold) to the trust for the benefit of the son, so that the BPR on these would not need to be apportioned between the gift to the trust for the son and the gift of residue to charity.

If we were varying the Will and section 142/144 applied, it should not matter if the shares had been sold after death, as there would be a reading back to the date of death, but does the same principle apply here?

I’m not sure how that would tally with the income tax/CGT treatment of assets which have been sold. The AIM investments have been sold in the hands of the executors - but if they are now appointed out of the estate to a trust for the son, does the gain or loss on those shares shift to the trust?

To date, no assets have been appropriated to the Will trust as the estate is still in the course of administration.

All thoughts gratefully received.

2

There is a problem with your query. You say there is a “discretionary trust of residue” and then you say “residue will pass to charity”. These statements are inconsistent.

Unless the BPR qualifying assets are the subject of a specific legacy then interaction will apply. It doesn’t matter if you ‘appoint’ (I think you mean appropriate) the proceeds of sale of those assets to the trust for the son.

In circumstances such as these I don’t readily see how you would vary the will. ‘Reading back’ does not apply to an exercise by the executors of their powers of appropriation.

Assets that are sold during the course of administering the estate will be charged to capital gains tax on the executors. The ultimate destination of the proceeds of sale is not relevant to that.

Paul Davies
Clarke Willmott