My query is about whether you can appropriate a specific legacy.
Testatrix has four daughters A, B, C and D.
A B C contributed to the purchase of the family home and the testatrix signed a Declaration of Trust stating that on her death the house would be sold leaving the proceeds to A B C equally. Her Will specified the same as a specific gift. The residue was left to all four children A B C D but there is nothing except the property in the estate.
The proving executors are A & B two of the daughters entitled to the property. The property is selling for £30,000 more than the probate valuation submitted in the IHT205. Can the executors A & B sign a Memorandum of Appropriation to A B & C (all due to receive the proceeds of sale) and wipe out potential Capital Gains Tax?
Can the two executors appropriate the gift to all three beneficiaries who are entitled to the property (which is a specific gift) even though it does not form part of the residue?
It is not clear from the facts set out if A, B and C’s entitlement to the property arises under the declaration of trust (DoT), or under the will.
If under the DoT, then there is nothing in the estate to pass under the specific devise.
If the property passes under the will, then in order for the sale to be made by A, B and C, I consider there should be a memorandum of appropriation. As it is stated that there is nothing except the property in the estate, if there is no appropriation, HMRC might argue that it had to be sold to discharge the debts, funeral expenses, and expenses of administering the estate, and so potentially assess the executors.
If in the will the property is left as a specific gift to three beneficiaries then the executors will be selling as bare trustees, and so each of the beneficiaries will have their own CGT allowance. Therefore, there should be no need to appropriate the property to them.