CG37873 | Separate settlements: conventional use of special powers of appointment

A special power of appointment in conventional form was used in Bond v Pickford. This enabled the trustees to `apply capital for the benefit of any one or more of the Beneficiaries ... by allocating to such Beneficiary such sum or sums ... as the Trustees shall think fit either absolutely or contingently upon the attainment by him or her of a specified age or the happening of a specified event before the Vesting Day.' Typically this kind of power is given to the trustees of a family discretionary trust. The trustees may appoint life interests with a gift over on the beneficiary's death. The life interest may be in specific trust assets. On this wording the power is in `narrower form', but a similar result may be obtained by use of a power in `wider form'.

In general, this should not be regarded as giving rise to a new settlement. It is to be expected that a discretionary settlement will include a power to enable the trustees to confer distinct interests in the trust fund on particular beneficiaries. The main function of a family discretionary trust, leaving aside taxation matters, is to give trustees a flexible facility to confer benefits on members of the family according to their current needs or general circumstances. The principal power of the trustees is to delimit or mark out the benefits which are to be taken by the beneficiaries under the settlement.

Swires v Renton, 64TC315, shows that some attention may be given to the intention of the trustees. However, the judge did not accept the Special Commissioner's view that one could look at the subjective view of the trustees in exercising their power. All that could be looked at is what they did and the actual wording of the documentation.