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Discretionary trusts

Where a discretionary trust is used for the nil rate band.

This is dealt with by entering the Trustees as pecuniary legatees in the Legatee browser. A typical description of the "legatee" would be " Trustees of the clause 2 discretionary trust". When the value of the trust is ascertained the amount is entered as a pecuniary legacy.

It may well be that the executors transfer one or more of the assets to the Trustees. It is not possible to use the appropriation function as this only applies to assets that are appropriated to residuary beneficiaries. It is therefore necessary to deal with the chosen assets as if they were sold to the Trustees.

As there will be no consideration received, the method for recording the transaction is as follows:

  1. Realise (sell) the asset, and show the chosen value as having been credited to a cash account in the name of the Trustees (the cash account will be created on-the-fly). 
  2. At this stage also enter an additional description line of "Transferred to the discretionary trustees" in the "Extra Details" in the "Realise an asset" screen.
  3. The realisation will then appear in the asset browser, and it will be possible to see clearly which assets were transferred to the Trust.
  4. The Trustees' cash account statement will list the chosen values of the assets transferred. 
  5. The final step is to call up the Legacies browser and record that the pecuniary legacy has been paid. When Probate Plus asks for the cash account from which payment has been made, choose the Trustees' cash account.

NOTES:

  • If the value of the asset does not exactly equate with the amount due to the Trustees then the Trustees cash account will show that there is a debit for the amount due. In practice, the balance will be made up by a cheque from the client account to the trustees' cash account. This is shown in Probate Plus by executing a Funds Transfer from the client account to the Trustees' cash account of a sum equal to the cheque paid to the Trustees.
  • The final position will be that the Trustees' cash account will equal the amount of the pecuniary legacy.
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