CG37560 - Absolute entitlement: part of trust fund: other assets

In Stephenson v Barclays Bank Trust Co Ltd, Walton J said that as regards shares in a private company in very special circumstances, and possibly mortgage debts, the person with a vested interest in a share of the property might have to wait for sale before he could call upon the trustees to account to him for his share. The principle of Crowe v Appleby therefore may apply to other indivisible assets. A good example would be an Old Master painting or valuable antique, or indeed a single share in a company.

In the case of shares this was applied in Lloyds Bank Ltd v Duker, [1987] 3 AllER 193, not a tax case. The estate of a deceased person consisted mainly of virtually all the share capital of an unquoted company. D was entitled to a large enough share of the estate to give him more than 50 per cent of the shares in the company on a strict apportionment. The Court held that the personal representatives should not distribute the shares pro rata to the beneficiaries under the will, because that would mean what D received was proportionately greater than what the others would receive, because the value of the majority holding, per share, was far greater than the value of the minority holdings per share. Instead they should sell the shares, giving D first refusal, and distribute the proceeds.

Trustees may claim that this case means there is no occasion of absolute entitlement, generally because the value of the fractional share which the beneficiary would get would be far less than his share of the whole of the trustees’ holding. Such a claim may be accepted without query if

• the trustees have a majority holding and
• the beneficiary is entitled to one third or less of the trust property and
• hold-over relief could be claimed under TCGA92/S165.

In any other case the trustees should be asked for evidence of the values, which should be referred to Shares and Assets Valuation on form CG30, with a covering memo. It should however be made clear to the trustees in all cases that you are merely satisfied that there is no deemed disposal. You must avoid agreeing to any of their valuations.