Appropriation of Estate Assets for CGT

Trusts Discussion
1

Hello all,
I am dealing with an estate left 50% to a private individual and 50% to charity. The cash assets (circa £1.2 mill) have already been collected in and distributed among all the beneficiaries. There is a property that has hugely risen in value since probate with the gain expected to be £110k. I am still holding £50k cash in client account. The Will has STEP Provisions version 1 with deletion of para 5 and S 11 and 19 of TOLATA 96 excluded.

Is it still possible to appropriate most/all of the property to the charities for the purposes of sale even though the cash has mainly been distributed as per the Will or can I now only appropriate 1/2 the value of the property up to the value of the property plus £50k (reserving the £50k cash for the private individual) as there will still be a gain in this case.

Alternatively, is it possible to appropriate the property entirely to the charities and deal with the cash assets previously distributed as a loan to the charities or ask them to hold the requisite portion of their previously distributed cash as nominees for the private individual.

Any inventive ideas would be welcome!

Many thanks

2

If there is no need to resort to the proceeds of sale of the property to complete the administration of the estate, the property could be appropriated equally to the beneficiaries. The charity’s gain would be exempt.

I would strongly advise against seeking to re-characterise the distributions to the charity as “loans” so as to enable charity relief to apply to a greater part of the gain. As this would be altering the facts to obtain a tax advantage, there may well be reputational risks and, as the proceeds of sale will not all be applied for charitable purposes (repaying a loan is not “charitable”), HMRC would likely deny CGT charity relief once it was aware of the facts (so a double whammy, at least).

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals