Deed of Variation to create Trusts and CGT position

Deceased’s brother, EH, is Exor and sole benef in estate worth approx. £500K. EH wishes to vary Will as follows:

20% to him
20% to one daughter
20% to disabled son on Discretionary Trust
20% to other daughter on Discretionary Trust re: her money issues/benefit retention - believed likely will be appointed out in a year or two
20% for two minor grandkids, one born to each daughter. This to age 25 though held on Discretionary Trust.

I explained could have one Discretionary Trust but EH prefers these to be more defined.

Firstly, am I correct in thinking DoV can do as suggested?

Secondly, for CGT, can a Memo of Appropriation be prepared to provide 5 x CGT allowances? As the property is likely to sell for £40K above HMRC approved probate value, this has obvious benefits but I am not sure if this would work with the Trust element.

Karl Taylor
Graysons Solicitors

There is no reason the proposed arrangements cannot be put in place using a deed of variation, provided the 2 year window is still open.

If separate trusts are to be used for the disabled son, the daughter and the grandchildren, I would usually recommend that they be established separately and the variation merely direct the relevant percentage of the estate to be held upon the individual trusts.

Provided the variation is in place before the property is sold, I see no reason why an appropriation cannot take place to share the gain between the entities. However, it needs to be born in mind that the annual CGT trust allowance will be shared between the 3 trusts, effectively meaning that only 1 trustee’s annual allowance will be available against 60% of the gain. If the sale will complete before the executor’s annual CGT allowance is no longer available, there might be a benefit in appropriating only to the brother and his son before sale, with the executor’s allowance being applied to the remaining 60%.

Going forward, if separate trusts are set up, during any tax year in which they still exist they will share the trustees’ annual CGT and basic rate tax allowances equally, whether or not there are gains, or taxable income, within any individual trust.

Paul Saunders

Thank you Paul. With regard to the appropriation, I take it you mean appropriate 20/20 and leave the remaining 60% with the Exors as the Exors allowance is larger than the Trustees allowance?

Karl Taylor
Graysons Solicitors


Paul Saunders