Q&As

Can a deed of variation by the beneficiaries be used to amend trustees' powers in a discretionary trust set up by Will?

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Published on LexisPSL on 22/09/2020

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • Can a deed of variation by the beneficiaries be used to amend trustees' powers in a discretionary trust set up by Will?

Can a deed of variation by the beneficiaries be used to amend trustees' powers in a discretionary trust set up by Will?

Where all of the members of the discretionary class and the default beneficiaries are all identified, aged 18 or over, are all of sound mind and they all agree, they may call for the trust to be terminated and for the trust property to be distributed or held by the trustees at the beneficiaries’ direction (Saunders v Vautier). If these conditions are met, the beneficiaries could collectively specify fresh administrative powers which are applicable to the trust property.

There is an argument that such a direction which amends the administrative provisions but does not change the beneficial provisions does not create a new trust but results in the continuation of the original trust. If that is the case, the direction by the beneficiaries would not be a disposition by them for the purposes of the Inheritance Tax Act 1984 (IHTA 1984) and therefore, if that is correct, the beneficiaries would not need to rely on IHTA 1984, s 142 or section 62(6) of the Taxation of Chargeable Gains Act 1992

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