CG37530 | Absolute entitlement: part of trust fund: Trustees' power of appropriation

If the trustees have an express power to decide which assets should go to a beneficiary in satisfaction of his or her beneficial interest, no beneficiary should be regarded as having become absolutely entitled to the appropriate share of any such assets until the last contingency is fulfilled. For these purposes the statutory power of appropriation given to personal representatives should be disregarded because it no longer applies once the administration of the estate is completed and they then hold as trustees rather than as personal representatives.

If, however, the trustees, before the last contingency, appropriate specific assets to a beneficiary whose share has vested, there is a Section 71(1) occasion of charge in relation to those assets at the date of appropriation. The reason for this is that if the trustees have an express power of appropriation they can decide which assets a particular beneficiary is to receive as his entitlement. Until this power is exercised, the beneficiary cannot claim any specific asset and therefore it cannot be said that he or she is absolutely entitled to a fractional share of everything.

If the last contingency occurs before the power of appropriation is exercised, absolute entitlement does occur then because the beneficiaries are jointly absolutely entitled to the whole of the settled property.

Scottish trusts

Where a trust is set up under Scottish law, unless the deed provides otherwise, the trustees have the power to decide whether assets should be realized or handed over. This power is analogous to an express power of appropriation in an English case. In such cases the guidance at CG37530 applies, but subject to one qualification. The event which gives rise absolute entitlement, other than the final contingency, is the intimation by the trustees to the particular beneficiary that they have appropriated the assets to him or her. See the IHT case of Stenhouse Trustees v Lord Advocate (1984) STC 195.