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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Conventional but bare trusts: powers of appointment held by beneficiary

These are examples of bare trusts.

A has a life interest. He has a general power of appointment by deed or will. A also has the interest in remainder under the settlement.

B is the settlor. He has a life interest. He has a general power of appointment by deed or will. There is no remainderman specified in the deed. In this case B has the interest in remainder by law because he is the settlor, and therefore has all the interests.

This is a more difficult situation.

C has a life interest. She has a general power of appointment by will only. There is no remainderman specified in the deed.

C however also has the residual interest under the settlor’s will. Assuming that the settlor is dead, this means that she has the interest in remainder under the settlement.

In this case too the beneficiary has all the interests under the trust. Therefore it is a bare trust. The restriction to appointment by will may make it seem that her powers are restricted, but under the principle in CG34430 she can call for the property.

While the settlor was still alive however it was settled property because the settlor could always have changed his will.

By way of contrast this is not a bare trust:

D has a life interest. She has a general power of appointment by deed or will. If this is not exercised the property goes to Y.

The reason it is not a bare trust is that she does not at this stage hold all the interests. If she dies the property goes to Y. She must override Y’s interest by appointing the property to herself. A general power of appointment over trust property does not automatically make its holder absolutely entitled.