Probate involves applying for a legal document called a Grant of Probate, or a Grant of Letters of Administration, which gives executors the authority to manage a deceased person’s estate.
During the probate and administration journey, you might encounter Deeds of Appointment. In this article, we’ll explore:
Table of Contents
- What is a Deed of Appointment?
- Do I need a Deed of Appointment?
- Who can execute a Deed of Appointment UK?
- What should be included in a Deed of Appointment?
- Who should sign a Deed of Appointment?
- Does a Deed of Appointment terminate a trust?
- Legal requirements for a valid Deed of Appointment
- How can a Deed of Appointment impact inheritance tax?
- How can Lawhive help?
What is a Deed of Appointment?
A deed of appointment is a legal document that names someone for a specific job or role.
In the context of wills, trust, and probate, it usually relates to trust management. You usually come across two main types of Deeds of Appointment:
Deed of Appointment to assign a new trustee
If there’s a need to change or add a trustee (for example if there’s only one trustee named in a will or a trustee steps down from the role), existing trustees can appoint a new one using a Deed of Appointment.
Deed of Appointment to allocate assets in a discretionary trust
When trustees manage assets in a will trust, they decide how to share the inheritance among beneficiaries. This includes deciding whether to give the full amount at once or in parts, setting conditions on how it’s used, and choosing who receives what. This authority is known as Power of Appointment.
Before 2007, it was common to include a Nil Rate Band Discretionary Trust in a will to protect part of the estate from tax. However, since 2007, if one spouse leaves their entire estate to the other, the surviving spouse can use both nil rate bands, totaling £650,000 currently.
If a Trust is no longer needed, the Trustees can change the will within two years of the person's death using a Deed of Appointment. However, all Trustees must agree, and they should seek independent advice before making any changes.
Do I need a Deed of Appointment?
If you’re assigning a new trustee to a trust, a Deed of Appointment is a legal requirement to confirm the role. The new trustee must also be told of their appointment.
If you’re transferring assets or responsibilities from a trust to another person or entity, you may not need a Deed of Appointment, but having one is a good idea because it shows who received what assets and when.
Who can execute a Deed of Appointment UK?
In the UK, trustees typically handle the execution of a Deed of Appointment within a trust.
In certain trusts, the settlor who created the trust may also have the authority to execute Deeds of Appointment, but this is less common and will be specified in the trust deed if applicable.
In more complex trusts, a protector may be appointed to ensure trustees follow the settlor’s wishes, this is particularly common in trusts designed for wealth protection and multi-generational planning.
What should be included in a Deed of Appointment?
A Deed of Appointment must include a clause that details either the appointment of assets or the new trustee(s).
When appointing assets from a discretionary trust, it must include:
The beneficiaries name
Details and value of the assets they’ll receive.
If assigning a new trustee, the Deed of Appointment must list the current trustees, the new ones, and any resigning trustees.
Who should sign a Deed of Appointment?
All trustees must sign a Deed of Appointment, whether it is used to transfer assets out of a trust or when appointing a new trustee.
Does a Deed of Appointment terminate a trust?
In some cases, a Deed of Appointment may lead to the termination of a trust, particularly if the trust’s purpose has been fulfilled or if the trustees decide to dissolve the trust according to the terms outlined in the trust deed.
In other circumstances, a Deed of Appointment is used to modify the terms of the trust by appointing new beneficiaries, changing the distribution of assets, or appointing new trustees.
Legal requirements for a valid Deed of Appointment
For a Deed of Appointment to be valid:
It must be in writing and clearly labeled as a deed
The trustees must have the authority granted by the trust deed itself
The actions of trustees must align with the trust’s objectives and not unfairly disadvantage beneficiaries
How can a Deed of Appointment impact inheritance tax?
Discretionary trusts were historically added to people’s wills to protect part of the estate up to the value of the Inheritance Tax nil rate band, which is currently £325,000 in England and Wales.
However, the introduction of the Transferable Nil Rate Band in 2007 changed this. So, now, if someone leaves their entire estate to their surviving spouse, both Inheritance Tax and nil rate bands can be used on the second death, totaling £650,000.
A Deed of Appointment can be used to change a will within two years of a person’s death to remove the trust and make other arrangements if appropriate, given the original intention for the trust was to protect part of the estate up to the value of the Inheritance Tax nil rate band.
How can Lawhive help?
We get it. Probate and estate administration can be complex and hard to understand. If you’re grappling with wills, trust, and probate matters and are unsure whether you need a Deed of Appointment, our network of expert solicitors is on hand to provide advice and prepare a Deed of Appointment should you need it.
For a fixed fee quote, contact our Legal Assessment Specialists today.