Independent Trustees and Memos of Appropriation

I am dealing with an estate where the residue passes to a discretionary trust. There are 3 siblings. Siblings A & B are executors. Siblings A, B and C are trustees. We are still within 2 years of death.

Sibling A wishes to purchase property from the trust/estate at probate value which has been agreed by all of the family. The proceeds will be distributed to Siblings B & C.

There is likely to be a capital gain on the property and so before sale:

  1. the trustees will appoint a share of the trust to Siblings B & C
  2. the executors will appropriate the property to Siblings B & C in satisfaction of their entitlement so that the sale by the estate is as “bare trustee” for B & C allowing them to use their own CGT allowances.

The issue we have is that the Will includes the first edition of the STEP provisions and does not exclude the need for an independent trustee.

The appointment can be dealt with by appointing an independent trustee to the trust.

However, the appropriation is effected by the executors and you cannot appoint an executor of an estate.

The STEP provisions allow the trustees to appropriate but at what point does the property become trust property and are there any tax consequences of the transfer from estate to trust that prevent the trustees from appropriating to a beneficiary at probate value?

If so, is it possible to appoint a trustee of the estate to act with the executors for the purposes of the appropriation?

Any thoughts appreciated!

Rachel Sugden
Willans LLP