Charitable appropriation of shares where usual admin powers are missing from the Will

Trusts Discussion
1

I am acting in a case in which I want to appropriate some shares to some charities but the deceased left a poorly drafted Will which does not have the usual admin powers. Normally, with the right admin powers, one would appropriate at the date of death value. In this case, it looks as though I need to appropriate using the values as at the date of the appropriation. This would be rather awkward for me as I have a lot of high value shares and I could end up with three sets of figures for each one (the date of death one, a fresh set of valuations commissioned to show the value on the date on which the deed is signed and then the actual sale prices achieved). I am trying to draft this in such a way as to avoid the middle valuation which doesn’t add anything useful to anyone but seems to need to be done (and paid for) in the absence of any creative thinking.

If I can validly make the deed of appropriation effective in respect of each individual shareholding in the moment immediately before its sale then everything falls into place. I can make all my estate account entries for the appropriations for the sale proceeds actually realised on the date of sale. So, I have set out below the operative provisions I am proposing to use in the middle of my Deed of Appropriation.

No 2 is the one which creates the problem but which probably does need to be there and no 3 is the one I have drafted in an attempt to sidestep the problem. The question is, does it work?

Many thanks

OPERATIVE PROVISIONS

  1. In exercise of the power of appropriation conferred on me by statute, I hereby appropriate the Shares to the Beneficiaries on account of their interest or share in the Deceased’s estate.

  2. The appropriated assets shall be brought into account at the value at the date of this appropriation.

  3. I will then sell the Shares as a bare trustee on behalf of the Beneficiaries and this appropriation shall be deemed to be effective in the case of each of the Shares immediately prior to its sale such that, effectively, the appropriated assets shall be brought into account at their sale value.

  4. Any income received after the date of this appropriation in respect of any appropriated assets (net of expenses referable to that income) shall be payable to the beneficiaries to whom that asset has been appropriated.

David Lunn
TWM Solicitors

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2

s.41 Administration of Estate Act 1925 is the statutory provision governing appropriation, although can be modified by the terms of the will.

In the absence of any specific/modifying terms in the will, the consent of the beneficiary to the appropriation is required.

As regards the value to be used, this will be as at the date of appropriation (Re Charteris [1917] and not the value as at the date of death, no matter how inconvenient that might be felt to be. For CGT purposes, though, the beneficiaries will be deemed to have acquired at the date of death value (s.62(4) TCGA 1992).

Whilst the Special Provisions of the STEP Standard Provisions (2nd Edition) , if incorporated, allow an executor to appropriate at the date of death value, HMRC has previously stated that this could give rise to a transfer of value between beneficiaries.

The starting point must be the communication to the charity, identifying the assets that it is proposed be appropriated to them and seeking confirmation both that the charity consents to the appropriation, and directs that any such shares appropriated be sold immediately after appropriation. It may be that the Charity might want some of the shares transferred… Whilst it may be acceptable to then use the sale price as the value for the appropriation, the transaction costs will be payable by the beneficiary without reducing the value of the appropriation.

Paul Saunders

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