Skip to main content.
Cheap Insurance Quotes UK Insurance Online

Power of appointment trusts

Under this trust the trustee is given power to appoint or vary the beneficiaries. A typical wording would be as follows.

“On trust for all or such one of my wife AB and the children of our marriage in such or shares to the trustees shall from time to time by deed or deeds revocable or irrevocable appointment and insofar as any such appointment shall not extend or shall fail for any reason on trust for my wife AB absolutely.”

The trustees have a certain amount of discretion for the time being. Where the wording provides for a gift over beneficiary (default beneficiary) and has the interest in possession for inheritance tax purposes. The interest in possession is the right to any income from the property as and when it arises over that period of possession.

This type of trust is flexible and allows the trustees to vary the beneficiaries according to the family circumstances. It can cope with deaths and births in a way which would not be possible under a fixed trust. Maximum flexibility can be maintained if any appointments are made revocably.   The power however can only be exercised among the prescribed class of beneficiaries.

Most life offices use the power of appointment trust as their standard trust form.

Power of appointment trusts that do not have a default beneficiary have no interest in possession and are often called discretionary trusts.

Statutory trusts

These are trusts specifically created by statute.   The Married Women’s Property Act 1882 will commonly create a trust for the benefit of the wife when the husband dies.   Another type of statutory trust is the one that is created in cases where a person dies intestate under the Intestates estates Act 1952.

Trust creation

A trust may be created by will, deed or statute; it can even be created by implied action or verbally.   One of the most common is by deed where the trust is set up for property to be held for the benefit of the beneficiaries.   The trustees and their power and the beneficiaries and their rights will be spelt out in the trust.   It will be signed by the settler and also the trustees to show that they accept their position.

Trusts under life policies are usually set up using a form provided by the life office.

The three certainties

The following three items must be present for a trust to be formed (Knight v Knight 1840).

Trustees

The trustee is the legal owner of the property but can only use the property for the benefit of the beneficiaries. Anyone over the age of 18 and sane can be a trustee under English law.