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HMRC internal manual

Capital Gains Manual

Death and Personal Representatives: Legatees and their treatment: who is a legatee: trustee as legatee

If a trust is created by the will or intestacy and does actually come into existence then the trustees of that trust are legatees in precisely the same way as, for example, an individual taking an absolute interest in an asset. This is confirmed by TCGA92/S64 (2). As a result the personal representatives are not liable to Capital Gains Tax for disposals after assets have vested in the trustees, see CG30760, and the trustees acquire the assets at market value, see CG31140.

When assets pass to the remainderman of the will trust when it comes to an end, the remainderman does not receive the assets from the trust as legatee of the will but as a beneficiary of the trust. The transfer is therefore not exempted by reason of TCGA92/S62 (4), see CG31140. Unless any other exemption applies there will be a chargeable gain on the trustees at that time by reason of TCGA92/S71 (1), see CG37100+.

This is in contrast to the position when a will or intestacy sets out to create a life interest trust but the life tenant dies during the period of administration. In those circumstances no trust over specific assets ever comes into existence. The remainderman of the trust becomes the legatee under the will in place of the trustee. When the assets vest they vest directly in that remainderman. Accordingly the remainderman takes as legatee, there is no Capital Gains Tax charge at that time and the remainderman’s acquisition cost is the market value at the date of death.