That will teach me to jump to conclusions without first seeking clarification, though it would help if crucial facts were not left out of queries!
A preliminary point is that this set of facts is now fairly bristling with rights of action. In the real world no one in the family may be minded to pursue them, although it does not do to be too sanguine about this as families have been known to fall out, especially about money, long after the events as the law reports demonstrate. The theory however cannot be ignored because it will affect the tax analysis and the prospective opponent here is ultimately HMRC. not renowned for its generosity or broad brush.
The legal position is that on death the late spouse’s share of the property belonged to the will trustees because it was a specific gift, since it was not needed to pay liabilities. The executors should have assented to the trustees. You do not say whether they were the same people but in theory even so they would have had separate capacities. Theoretical right of action No 1. The survivor in his own capacity has meddled and is an executor de son tort, theoretical right No 2. The trustees have failed in their duty to secure trust property, theoretical right No 3. Rights of action are chargeable assets for CGT.
The share itself is deemed to be acquired by the executors at market value at the date of death, with a discount for being less saleable, as the deceased was competent to dispose of it: s 62(1) TCGA. But the survivor has taken possession of the asset without owning it so they acquired also a right of action against him, which has the nasty theoretical base cost of nil:s17(2). If the survivor were to dispose of the entire property, the question would arise: what is the effect as regards the share he does not own? Arguably he would act as a bare constructive trustee of the will trustees’ share of the sale proceeds and so the trustees would be deemed to make the disposal for CGT:s60.There is no way that any gain would attract PPR. The trustees would then also dispose of their right of action or would do if they got they hands on the money. Arguably that would not be a “capital sum” received under s22 as it is their own money, so the right would be extinguished without consideration and there would be no separate gain as s17(1) does not apply market value (one would hope HMRC will accept that to avoid double taxation).
The will trustees, if reconstituted as a body, could exercise their power of appointment under the DT (I have not seen the document) to distribute the asset to the surviving spouse. This will trigger a gain without PPR. Hold-over relief could apply, as it is an RPT chargeable event for IHT, but s226A will then prevent a later PPR claim by the survivor. If the gain on distribution would now produce an unacceptably high CGT bill it may be preferable for the survivor to transfer the half share to the trustees (no CGT disposal) who can then permit him to reside (even though he is entitled to do so as joint owner) with a view to begin to clock up some future PPR on the trust share.
A distribution of the asset would put right the conveyancing muddle but could be deferred until a sale was in prospect. The danger is that the taxable trust gain will grow with the value of the property. If nothing is done the the trustees will need to be to be parties to any future contract of sale because the Form A is still extant, as the query indicates. A deed of appointment before sale would allow HMLR to remove the Form A (when they got round to it) and the sale would provide cash to pay the trustees’ CGT. An appointment after sale would have to be of the sale proceeds net of the trustees’ CGT.
The original query was whether the survivor can leave the deceased’s share by a new Will. He plainly can’t as he does not own it. Also he is going to encounter a conveyancing problem on a future sale while the Form A is on the register. I cannot see how he can be made the sole owner of the entirety without some CGT, either now or later, on the trustee’s half share. The Ostrich Strategy is sometimes a lay client’s preference but hoping no one will notice may result in a future nightmare for him or his family if the Form A opens the can of worms when the property needs to be sold, with HMRC leading the charge and advice costs multiplying in sorting it all out later. (Dare I mention TRS?)