Trust Register and Appropriations from Estates

Trusts Discussion
1

Executors appropriate assets (shares or property say) for an estate to the residual beneficiaries ahead of a sale for CGT purposes. As this creates a bare trust presumably this is registerable? I cannot see that the exemptions apply (exors are not the same as the Residual beneficiaries). Is that correct?

1 Like
2

Trusts created by will are excluded from registration for a period of two years to allow for dealing with an estate of someone who has died.

3

Thanks Francesca but I don’t see this as one created by the will but rather created by the Exors.

I have a case where some land was appropriated ahead of the sale but the sale then fell through and so we are left with the exors holding the property on behalf of the beneficiaries under the appropriation whilst new buyers are found. The will left the residue absolutely to the beneficiaries so there is no trust created under the will.

4

Nigel, I posted this same query a while ago and also think that this creates a registrable bare trust, unintended though it may be…

5

As Christopher points out there was a detailed discussion on this point which he raised.

See 2017 No. 692 Sch 3A para 15.

Malcolm Finney

6

Is this an “express trust”?

HMRC Guidance online 9 December 2021:

"The following types of trusts must register even if they have no tax liability:

  • all UK express trusts — unless they are specifically excluded
  • non-UK express trusts, such as trusts that:
    • acquire land or property in the UK
    • have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK" (My emphases)

Jack Harper

7

I have raised this question on the HMRC agent community forum, and will post whatever response I receive. However, it may take a week or two for that to arrive.

8

Thanks Diana and all other who replied.

Aside form this has anyone any thoughts on the first example in HMRC Trust Register manual at TRSM23020:

John dies in England on 1 June 2022. He leaves his estate to his executors and trustees to hold on trust to pay his debts and funeral expenses and to divide the remainder between his wife and brother in equal shares absolutely. Under English law this creates a trust. As a trust created by will, the trustees are not required to register the trust immediately on John’s death.
The estate is fully administered and all property in the residuary estate is distributed to his wife and brother by December 2023. As this is within two years of John’s death, there is no need for the trust to be registered on the Trust Registration Service (TRS).

This would suggest that any estate where the administration takes longer than two years would need to be registered!.

1 Like
9

It’s an express trust

Jack Harper

10

There has been discussion on these issues before and it may pay dividends to search the Forum.

The first matter to be resolved as to whether trust registration is required is to ascertain if the trust is an “express trust” [SI 2017 as amended Reg 42].

If it is, registration is then required unless the trust qualifies as an “exempt” express trust [Sch 3A].

Sch 3A para 7 provides exemption wrt a will trust (which is an express trust) where:

“(a)the trust is holding only the property comprised in a person’s estate on death, and
(b)less than two years has passed since that person’s death”.

So, if the will trust holds property for two years or more from the date of death, registration becomes necessary from the two year deadline [as this two year condition is satisfied in HMRC’s example, TRSM23020, no registration was necessary].

Wrt Nigel’s original post concerning appropriation, is the trust created an express trust. Arguably it is not an express trust (see below) as it is created by the PRs but, if it is, then Sch 3A para 15 may be in point. TRSM 21030 provides:

" An express trust is a trust created deliberately by a settlor, usually in the form of a document such as a written deed or declaration of trust. Express trusts can be created:

  • to take effect during the settlor’s lifetime, or
  • by will, to take effect on death.

Express trusts can be contrasted with trusts that come into being through the operation of the law and that do not result from the clear intent or decision of a settlor to create a trust or similar legal arrangement (for example, implied or constructive trusts)".

Malcolm Finney

11

Dear Diana, have you please heard back from the HMRC agent community forum?

12

Yes, sorry, I obviously forgot to post the response as promised.

My question to HMRC was:

“At TRSM23020 it states that a trust created by will that holds only property from the estate of the deceased person is excluded from registration as an express trust for a period of two years from the date of death (Sch3A(7) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017). The section quoted refers to a trust “effected by will”, and the example at TRSM23020 is a fairly typical situation where an estate is left to the executors of the will to hold on trust for a number of beneficiaries absolutely, confirming that this trust does not have to be registered for the first 2 years from death.

If, less than 2 years from the date of death, the executors appropriate a property to the beneficiaries of the will prior to sale, the executors then hold the property on bare trust for the beneficiaries. Does that trust have to be registered?”

Their response was:

“Where personal representatives appropriate property on bare trust for the benefit of the beneficiaries to facilitate a sale of that property, Sch 3A(14) would exclude such an appropriation from registration. Trust Registration Service Manual”.

The link to the Manual does not seem to contain an example specific to my question but the section quoted refers to “Trusts arising from commercial transactions”.

Hope that helps.

13

Some of the replies reference TRSM23020.

It seems to me that HMRC have overlooked para 7(2). eg:

Imre dies on 10 January 2022. His will appoints Lydia as his executor and leaves ÂŁ500,000 on trust for his minor granddaughter Natalie.

Lydia deals with the estate which is fully administered by 1 July 2023. The trust of the legacy continues for a further five years until Natalie reaches the age of 18.

The trust of the legacy to Natalie commences from the date death. However, as a trust created by will this trust is not required to register until 10 January 2024, 2 years after the date of death.

It seems highly unlikely that ÂŁ500K would be the aggregate of all the property to which Irme is beneficially entitled on death and thus the trustees might be required to register within two years of death.

It seems that the residue of Irme’s estate will also not be within para 7, if was held on trust.