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Deed of Appointment Trust UK: How Trustees Exercise Powers of Appointment

Updated 31 May 2026 · 8 min read · Trust Law & Administration

When trustees of a discretionary will trust decide to pay capital to a beneficiary, they do so by executing a deed of appointment. The deed formally records the exercise of the power, names the appointee and the appointed property, and creates a binding obligation to transfer. Getting it right is essential — an invalid appointment may be void.

What Is a Power of Appointment?

A power of appointment is an authority given under a trust deed or will to a specified person (the donee) to direct trust property to one or more persons within an identified class (the objects). The donee is not a beneficial owner of the property — they simply have authority to determine who within the class takes it, and when.

Powers of appointment are essential tools in discretionary trusts, life interest trusts with flexible remainders, and many modern family will trusts. They allow the trust to be administered flexibly in response to changing family circumstances without needing to return to court or vary the trust formally.

General vs Special Powers

A general power allows appointment to anyone — including the donee themselves. A person with a general power is treated as owning the property for IHT purposes (IHTA 1984 s.5(2)).

A special power restricts the class of objects — for example, “to appoint among the children and grandchildren of the settlor.” This is more common in will trusts because it maintains the trust structure while providing flexibility within the intended family. Property subject to a special power does not form part of the donee’s estate for IHT unless they make an appointment to themselves (which a restricted class would normally prevent).

Validity Requirements for a Deed of Appointment

For a deed of appointment to be valid:

  1. The correct donee must exercise the power — usually all the trustees acting jointly.
  2. The deed must be in writing and executed as a deed — signed, witnessed, and delivered in accordance with the Law of Property (Miscellaneous Provisions) Act 1989.
  3. The appointment must be within the scope of the power — only objects within the specified class can be appointed to. Appointments outside the class are void.
  4. The tax consequences must be considered and reported — IHT exit charge, CGT on appointment of assets with unrealised gains, and SDLT on appointment of land.
  5. The deed should be retained as a permanent trust record — it alters the beneficial interests in the trust and forms part of the trust accounting.

IHT: Exit Charges on Appointments

A deed of appointment from a relevant property (discretionary) trust triggers an IHT exit charge under IHTA 1984 s.65. The charge applies to the value leaving the trust. The rate depends on:

Key exception — IHTA 1984 s.144: An appointment made within two years of a death that created the relevant property trust (typically a will trust) is read back into the will and treated as if the deceased had made that disposition. This avoids the exit charge entirely for early appointments made to redirect the trust distribution as originally intended.

Fraud on a Power

An appointment that is made for a purpose outside the proper scope of the power is void for fraud on a power, even if the nominal appointee is within the class. The test from Vatcher v Paull [1915] AC 372: the appointment must genuinely benefit the appointee; an appointment made on a side-arrangement that the appointee will share the benefit with someone outside the class is void.

Trustees should ensure that appointments are made in the genuine interests of the appointee, without side conditions and without ulterior purpose. Void appointments are treated as if they had not been made — the property remains in the trust on the original terms.

FAQs

What is a deed of appointment in trust law?

A deed of appointment is a formal legal document by which a person who holds a power of appointment — typically a trustee, a settlor, or a life tenant — exercises that power to appoint trust assets or income to one or more beneficiaries. A power of appointment gives the holder (the 'donee' of the power) the authority to direct who, within a defined class of objects, receives specified trust property, and when and in what shares. The deed formally records the exercise of that power. Once validly executed, the deed is binding on the trustees and transfers the benefit of the appointed property to the appointee. Deeds of appointment are most commonly used in: (1) discretionary trust administration — trustees exercise their dispositive discretion by making an appointment of income or capital to one or more beneficiaries; (2) will trusts — where a life tenant has a power to appoint the remainder to children; (3) pension trust nominations — though in pension trusts the expression of wishes form is a guide to trustees' discretion rather than a binding exercise of power.

What is the difference between a general power and a special power of appointment?

A general power of appointment allows the donee to appoint the property to any person they choose — including themselves, their own estate, or their creditors. A special power of appointment restricts the class of objects to specified persons — for example, 'to appoint among the children of the settlor', or 'to appoint among the beneficiaries named in Schedule 1'. The distinction matters for: (1) IHT — property subject to a general power of appointment forms part of the donee's estate for IHT purposes (because they have the equivalent of ownership over it); property subject to a special power does not form part of the donee's estate unless they exercise the power in their own favour (which would not be permitted under the restricted class). (2) Scope of exercise — a general power can redirect the property entirely outside the trust class; a special power can only benefit those in the permitted class. (3) Fraud on the power — exercising a special power for a purpose outside its proper objects ('fraud on a power') is void or voidable in equity. (4) Reservation of benefit — if the settlor retains or gives themselves a general power, HMRC may challenge the trust on reservation of benefit grounds for IHT purposes.

What must a deed of appointment contain to be valid?

A deed of appointment must satisfy certain formality requirements depending on the property being appointed. For the exercise of a power to be valid: (1) It must be exercised by the correct donee — only the person named in the trust as having the power can exercise it; trustees as a body exercise discretionary trust powers collectively. (2) It must be in writing and usually in a deed — where the power is over land, the Law of Property Act 1925 s.53(1)(c) requires a written instrument; for most trust powers, a deed is required to ensure binding effect and to satisfy registration requirements. (3) It must comply with the terms of the power — a special power can only appoint within the specified class; appointment outside the class is void. (4) It must be stamped with relevant taxes or taxes calculated and reported to HMRC where required. (5) For appointments creating new trusts of land, Land Registry formalities apply. A deed of appointment should typically state: the trust deed or will under which the power arises; the date; the donee(s) exercising the power; the appointed property (described precisely); the appointee(s) and the shares/interests appointed; any conditions or trusts on which the property is held going forward; and the signatures of all trustees (or the relevant donee) executed as a deed.

What are the IHT consequences of a deed of appointment from a discretionary trust?

A deed of appointment from a discretionary (relevant property) trust is a distribution that typically constitutes an 'exit charge' for IHT purposes under IHTA 1984 ss.65–69. The charge is levied on the value leaving the trust: the rate is a fraction of the 'effective rate' calculated at the most recent ten-year anniversary, multiplied by the number of complete quarters since the last charge. For trusts set up within 10 years, the rate is calculated separately. The exit charge rate is generally low (up to 6% for a trust that has been running for exactly 10 years), but can accumulate significantly over time. Key exemptions from the exit charge: (1) Appointments to a surviving spouse or civil partner of the settlor within two years of the settlor's death may be read back into the will under IHTA 1984 s.144. (2) Appointments within two years of death that redirect the trust distribution can also be read back under s.144 to be treated as made by the deceased's will. (3) Appointments to charities — s.76 exemption.

What is fraud on a power and when is an appointment void?

Fraud on a power (or 'fraud on a trust') occurs when a donee exercises a power of appointment for a purpose that is outside the proper purpose of the power — typically to benefit themselves, or to give an appointee a benefit contingent on that appointee conferring a separate benefit on someone outside the class. The concept was developed in Vatcher v Paull [1915] AC 372 (PC): an appointment that is made with the purpose of benefiting a person outside the class, or for a collateral purpose not authorised by the power, is void even if the nominal appointee is within the class. Examples of fraud on a power: (1) Appointing to a child on the informal condition that the child shares the appointment with a spouse who is outside the class. (2) Appointing to a class member for an improper purpose such as sheltering assets from the donee's own creditors. (3) Appointing to a spouse who is not a class member by routing the appointment through an in-class child with an agreement to share. A void appointment is treated as if it had not been made — the property remains on the original trust. Voidable appointments (exercised in bad faith or under undue influence) can be set aside in equity.

How does a deed of appointment interact with a power of advancement?

A power of appointment and a power of advancement are related but distinct powers. A power of appointment (general or special) allows the trustees or a named donee to redirect the beneficial interests in the trust permanently to a person within the class. A power of advancement under Trustee Act 1925 s.32 (as amended) allows trustees to apply capital for the 'advancement or benefit' of a beneficiary who has a present or future interest in the capital — typically for educational, financial, or welfare purposes. The key differences are: (1) Nature — an appointment permanently alters the beneficial interests; an advancement is a payment of capital on account of (or in lieu of) a future interest. (2) Statutory basis — advancement has a statutory basis (TA 1925 s.32); appointment is based on the trust document's express power. (3) Quantum — the unamended TA 1925 s.32 limited advancement to half the beneficiary's prospective share; the TA 2014 removed this limit for trusts created after 1 October 2014, so the full share can be advanced. (4) Consent — under the unamended s.32, advancement requires the consent of the person with a prior interest (the life tenant); the amended s.32 requires only that the trustees are satisfied it is in the beneficiary's best interests. A deed of appointment and a deed of advancement are sometimes used together — appointment to fix a share permanently, followed by advancement of that share to meet an immediate need.

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