Transfer of assets to beneficiaries

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

Transfer of assets to beneficiaries
Documenting the transfer of trust assets
Transferring particular types of asset
Taxation aspects of transfers of assets to beneficiaries

In exercise of their dispositive powers, trustees transfer income and capital to beneficiaries. For commentary on the different types of payments, see the Payments to beneficiaries guidance note. Most often, particularly in the case of income distributions, the payments will be in cash. Occasionally, the distribution is in the form of non-cash assets.

Trustees need to be aware of the way in which such transfers are done:

•in relation to the trust power that they are exercising ― is it a power that has to be exercised by deed or will a resolution suffice?
•in relation to the asset in question ― what formalities need to be complied with in relation to the particular asset in question?
•what are the tax implications of the transfer and what are the reporting requirements with which they need to comply?

Documenting the transfer of trust assets

The exercise of the trustees’ dispositive powers must comply with the terms of the trust deed from which the powers derive. So if the trust deed requires a particular power of appointment or advancement to be exercised by deed, then a deed must be used. If not, the exercise of the power will be void.

Equally, if the trustees require an indemnity on the distribution to protect them (should tax or other expenses arise), then the exercise of their dispositive powers should be made by deed.

Where a deed is not required, it will usually be sufficient for a trustees’ resolution to be completed to record the exercise of the trustees’ dispositive powers.

Transferring particular types of asset

Even once the exercise of the trustees’ powers has been documented, certain additional formalities might need to be adhered to in order to