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HMRC internal manual

Trusts, Settlements and Estates Manual

Deceased persons: limited interests in residue - discretionary interests in residue - definition

A discretionary interest in residue arises where the deceased did not specifically say in the will who was to get the income or capital of the residue. Instead the deceased left it to the personal representatives to decide at their own discretion.

In practice there are two situations in which a network office might come across a discretionary interest in residue.

  1. Where the terms of the will direct that the residue (or part of the residue) is to be held on trust and income/capital paid at the discretion of the trustees.
  2. Where the terms of the will direct that the personal representatives should exercise their discretion to select beneficiaries to receive the residue of the estate, but there is no provision for any continuing trust.

The first category of case should cause no problem. One of the Trusts & Estates Offices will be involved. That office will hold particulars of the income of the estate and the payments from it. Any payments from the estate during the administration period are the income of the year of payment.

The second category of case is rare and probably involves a large estate. Statement of Practice SP4/93 explains the treatment of these estates.

If you need advice on this subject, consult Trusts & Estates Edinburgh.