The deceased provided for a discretionary trust to be created under the terms of his will and we are approaching the 2nd anniversary of death.
There are several properties within the estate (still in the PRs ownership). If the properties are transferred to the beneficiaries (at date of death values), subject to their signing equitable charges (for the same values), the trust fund will then consist of several equitable charges rather than properties. Would there have been a disposal of the properties for CGT purposes?
They are disposals and should be acquired as legatees under s62 TCGA 1992 at their respective date of death values. It seems entirely arguable, precisely because I assume the PRs have not paid off the liabilities but taken charges to protect themselves, that the admin period re those properties has not ended and does so only when the assents are made. As a result the properties never become subject to the DT in the will. So the transfers are not by the trustees as an RPT chargeable event for IHT.
The assumed liabilities are not base cost to the transferees nor will be any improvement costs made by the PRs prior to transfer (Passant v Jackson). They will however be chargeable consideration for SDLT unless the assumed debt was secured on them at death so the exemption in para 3A Sch 3 FA 2003 would not apply. I presume that the charges are imposed on the property after death by the PRs as a condition of their making the assents, We are not told the exact nature of the liabilities secured or the identity of the creditors but presumably the latter are content to wait for payment.
There are no liabilities against any of the properties at the moment - the idea being to transfer the properties to the beneficiaries but subject to their signing an equitable charge in favour of the trustees for the same value as the properties so that the trust continues but with the trust fund only consisting of equitable charges. The equitable charges can then be treated as liabilities of the beneficiaries’ estates for IHT purposes.
Would their signing the equitable charges result in SDLT being payable?