Q&As

The trustees of a (previously created) discretionary trust are the residuary beneficiaries under a Will. Can the trustees enter into a deed of variation, so that the funds pass directly to beneficiaries of the trust (instead of becoming trust property)? Alternatively, can the trustees disclaim the gift? This would result in the gift passing to individuals who are within the class of beneficiaries under the trust.

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Produced in partnership with Oliver Hilton of Radcliffe Chambers
Published on LexisPSL on 20/07/2018

The following Private Client Q&A produced in partnership with Oliver Hilton of Radcliffe Chambers provides comprehensive and up to date legal information covering:

  • The trustees of a (previously created) discretionary trust are the residuary beneficiaries under a Will. Can the trustees enter into a deed of variation, so that the funds pass directly to beneficiaries of the trust (instead of becoming trust property)? Alternatively, can the trustees disclaim the gift? This would result in the gift passing to individuals who are within the class of beneficiaries under the trust.

The trustees of a (previously created) discretionary trust are the residuary beneficiaries under a Will. Can the trustees enter into a deed of variation, so that the funds pass directly to beneficiaries of the trust (instead of becoming trust property)? Alternatively, can the trustees disclaim the gift? This would result in the gift passing to individuals who are within the class of beneficiaries under the trust.

Presumably:

  1. the discretionary trust in question is in the usual form containing wide powers of appointment and advancement in respect of the income and capital of the trust fund, and

  2. the proposed scheme is to seek to take advantage of section 142(2) of the Inheritance Tax Act 1984 (IHTA 1984), which provides:

    ‘Where within the period of two years after a person's death—

    (a) any of the dispositions (whether effected by will, under the law relating to intestacy or otherwise) of the property comprised in his estate immediately before his death are varied, or

    (b) the benefit conferred by any of those dispositions is disclaimed,

    by an instrument in writing made by the persons or any of the persons who benefit or would benefit under the dispositions, this Act shall apply as if the variation had been effected by the deceased or, as the case may be, the disclaimed benefit had never been conferred.’

In other words, the intention is to redirect the gift,

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