We have an estate where the sole trustee is the life tenant of the residue of the estate, about £200k. There is a clause in the Will stating that if at least 2 Trustees (not including the life tenant) agree they can appoint some or all of the Trust Fund to him absolutely. The life tenant has agreed with the two adult remaindermen to bring the Trust to an end and divide the Trust Fund in 3 equal shares. We have prepared a Deed of Appointment and Indemnity. The Estate will shortly be finalized, the deceased died in 2022, it has taken a long time to get to this point as we had a property to sell, which has only just sold.
Can the Trustee just sign the Deed as Trustee and Life Tenant, and the Remaindermen as Remaindermen?
Do we need to appoint two other Trustees to appoint the 1/3rd share to the Life Tenant?
Is the Life Tenant making a PET of the 2/3 share passing to the Remaindermen?
Thoughts appreciated.
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If the three beneficiaries all have vested interests then they can sign a deed to carve up the trust fund pursuant to Sanders v Vautier. They would not need to follow the provisions.
However, if the deed is phrased as an exercise of the power of appointment then they would have to follow the provisions and first appoint two further trustees (who could presumably be the remaindermen).
A partition is not an “appointment” by the trustees. It operates as a direction to the trustee, pursuant to the rule in Saunders v Vautier, by the owners of the entire equitable interest (being adults with full capacity) to transfer the trust fund to them. The trustee is bound to do so.
So the document required is a Partition Agreement between the life tenant and remainderman. A deed is not required for a cash fund given consideration but is prudent.
Trustees would need to be a party to a deed to obtain an indemnity but here the LT is a sole trustee. The LT does not need an indemnity as to the 2 independent trustees rule as it is not engaged. The remainderman is hardly likely to complain that the partition is void and in equity would seem anyway to lack the mandatory “clean hands”.
The LT will receive his share free of IHT per s53(2) and makes a PET of the balance to the remainderman. This assumes the LT had a QIIP. If the trust is an RPT the entire fund is subject to an exit charge.