I have been asked by trustees of a will trust whether they can bring the trust to an end if the beneficiaries agree. Grandmother died 6 years ago leaving her 4 grandchildren (who all lived with her) a right to live in the property ‘until attaining the age of 25’ and then to residue. Residue divided into 4 equal shares for each grandchild on attaining 25, if any share fails it goes back to others. At the time of her death all were under 25, now youngest has just turned 18, he and one sister who is 21 are the only ones under 25. Three of them still live at the property and Trustees who are getting on in years and don’t want the hassle of dealing with them all would like to assent the property into all 4 names and distribute the remaining cash. Is this possible if all beneficiaries agree?
Not yet at first glance but the trustees could use a power of appointment to convert the two remaining contingent interests into absolute. Do they have such a power? If not does s32 TA 1925 apply with its current variation of 100% advancement. Strictly the trustees must consider this to be a proper use of their powers. The 4 can then terminate within S v V. CGT disposal but perhaps full PPRR or hold-over if RPT. IHT depends on whether it is an RPT or not. If not (pre-2006 or IPDIs) then QIIPs terminate but no charge as absolute ownership exception. If RPT a charge dependent on any NRB available but if any excess then a positive tax bill and at least a potential nuisance if the property is not to be sold. The beneficiaries will need to have the money or raise it.
Jack Harper
Thank you for your reply, so am I right in thinking the Trustees can use a power of appointment under s32 to make the final 2 beneficiaries interests absolute, and then all 4 can all agree to instruct the Trustees to wind up the Trust? The property is not to be sold at this point hence the wish to put in in all 4 grandchildren’s names, but I thought as beneficiaries are and have been occupying the property it would attract primary residence relief for CGT, but there may be a liability to IHT - there would be sufficient funds in the trust to pay this, grandmother died suddenly in 2017, (they were her daughters children who had died in 2014) and property only valued at £50k at date of death with total estate for probate just under £400k.
Strictly it’s a power of advancement. Little substantive difference but may wills/trusts permit an advancement to be made under hand only whereas exercise of a power is made to require a deed. I try to avoid deeds as you need witnesses and I have no friends. Like all similar comments on here it is made without sight of the actual document.
Your beneficiaries are at least all adults. Solicitors are vigilant to suggest each party should have separate representation which increases the fees of their mates and has the supreme advantage of being hard to criticise. It is probably only essential here if there is any smidgeon of a risk that converting the contingent interests would be detrimental to the contingent beneficiaries (if vulnerable, bankrupt or divorcing) and as long as the vested beneficiaries are on record as being happy to forgo the chance of the others popping their clogs before age 25 and giving them a top up (in the absence of forfeiture!).
You must be certain that 100% of the contingent interest capital shares can be dealt with, so the trust must be created or arise on or after 1 October 2014
Jack Harper
I agree with Jack but wanted to point out that if you advance the two remaining contingent shares to the 18 and 21 year olds, so that all the beneficiaries are absolutely entitled to their shares, I don’t think there is really any need to quote SvV. All concerned can just agree that the property will be transferred into the children’s names.
The case is the authority for the efficacy of such an agreement
Thank you very much Jack for your help, your response was as swift and very helpful in your usual entertaining way! Thanks also to Andrew for his input, very grateful to both