Appropriation through a discretionary trust

I have an estate in which there will be capital gains on the sale of shares. The residuary beneficiary is a discretionary Trust of which the primary beneficiaries are the children of the deceased. Can I appropriate the shares to the Trustees at probate value and then the Trustees make a further appropriation of them at the same probate value to the beneficiaries and then sell them on behalf of the beneficiaries one of whom lives in the Channel Islands and has no CGT liability

Christopher Hadfield
Nichols Marcy Dawson Solicitors

To do this, you would have to appoint the shares to the beneficiaries from the Discretionary Trust. That would cause the capital gain to arise to the Trustees and although holdover relief would be available, that would only be in respect of the shares passing to the UK resident beneficiaries and not to the shares going offshore. I don’t think the appointment, if made within 2 years of death, would enable the beneficiaries to acquire the shares at their Probate value as the relief under s62(6) TCGA 1992 only applies to Deeds of Variation and Disclaimers.

Graeme Lindop
Coles Miller Solicitors LLP

If the shares are appointed out by the trustees before they are appropriated to them, provided the residue is not already ascertained for cgt, they will not vest in the trustees for cgt purposes, and can then be appropriated by the executors to the beneficiaries direct.

Simon Northcott