Deed of Appointment

What it is

The document by which trustees exercise a power given to them, usually to decide who gets what out of a trust, and when. A trustee decision that is not properly documented is not a decision. It is a conversation.

How it works

• The deed identifies the power being used, confirms it exists and is being exercised correctly, and records exactly what is being appointed and to whom.
• Where trustees of a discretionary trust in a Will appoint assets out within two years of the death, the appointment is generally read back and treated as though the deceased had made the gift directly. That single mechanism rescues a great many estates.
• Reading back is what allows the residence nil rate band to be recovered where a home was left to a discretionary trust and is then appointed to a direct descendant in time.
• Timing affects tax. There is no exit charge in the first three months of a relevant property trust, or within three months of a ten year anniversary.

Where specialist advice matters

• The two year window closes. After it, the same appointment produces a different and usually worse tax result.
• An appointment is not the same thing as a transfer, and the reading back provisions are specific about which is which. Getting the mechanism wrong loses the relief.
• Trustees acting outside the terms of their power are in breach of trust personally, whatever their intentions were.
• Any appointment can trigger a duty to update the HMRC trust register.