Valuation of assets going into a trust

I have been instructed by clients appointed as executors and trustees of a discretionary will trust of a deceased who died some 5 years ago.They did not instruct me until recently. The assets comprise a property portfolio of rental properties owned as tenants in common between the deceased spouse and the surviving spouse. The rental income has all been declared in the surviving spouse’s income since death. I now have to put the severed share of some of these properties into the NRB discretionary trust and need to know which value to use as the properties have significantly increased in value.Furthermore is it possible to do a retrospective deed of appointment of the income so ratty in essence the position that the client adopted since death?
Elisabeth Whybrow
Silks Solicitors

It would seem to me inappropriate for the parties to enter into a retrospective deed of appointment unless there is evidence that the executors did exercise their power of appropriation, and that the assets have been administered in accordance with that decision, albeit the decision was not formally documented. In that instance the deed will merely record the decision, and when it was taken, but would need to be dated when the deed was executed, and not showing an historic date. It would be open to the beneficiaries to require sight of the supporting evidence, and possibly HMRC would seek this also.

If the executors had not exercised their power of appropriation, it seems to me that the NRB legacy remains unpaid and the trustees will be entitled to interest on the unpaid legacy from the end of the executor’s year, in addition to the capital value of the legacy. If it is to be satisfied now, by the appropriation of properties to the trustees, notwithstanding that the trustees will acquire the properties at “probate value” for CGT purposes for the appropriation, they will need to be revalued as at the date of appropriation (Re Charteris, 1917), and so will have a significant inbuilt gain.

Paul Saunders

From context, it sounds as if the intention may have been simply to insulate the NRB sum from IHT on subsequent deaths, and from the usual third party risks, rather than to direct the value away from the spouse.
If so, then if the Will contains the usual power allowing the executor to satisfy the gift to the trustees by creating a charge over the assets of the residue, that would do the job, avoid the CGT issue and significantly simplify the future administration of the trust.

Michael Cutler
Colemans Solicitors LLP