Work around for s2 Apportionment Act 1870

Trusts Discussion
1

I am dealing with a life interest trust which is now to be wound up following the death of the life tenant. It has been running since 1984 and was created via a hand written will which does not exclude s2 of the Apportionment Act. As it predates the 2013 revision of the apportionment rules, I think the old rules must still apply.

The value of the trust fund is substantial, with income from a large portfolio of shares and unit trusts of about £80,000 pa. Apportioning this between the life tenant’s estate and the trust beneficiaries is likely to be an expensive year long exercise.

Is there a work around? The life tenant’s estate passes to one beneficiary and there are seven trust beneficiaries, one of which is the estate beneficiary. If they wanted to split the income on the basis of when it arose, and perhaps made a formal agreement, would HMRC accept it?

2

The executors should invite the trustees to agree that no apportionment should be made, and the trustees should agree to that. The exchange of letters would be a binding contract. The saving in solicitor’s costs would be greatly overtaken. I’ve only known one trust where it was not considered a good deal.

Julian Cohen

Simons Rodkin

1 Like