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Appropriation

Also known as: Asset Appropriation, Estate Appropriation

Definition

Appropriation is the legal power allowing executors to transfer a specific asset from an estate directly to a beneficiary instead of selling it and distributing cash, giving executors flexibility to distribute actual assets like property or shares rather than cash proceeds.

What Does Appropriation Mean?

Under Section 41 of the Administration of Estates Act 1925, executors can appropriate estate assets "in satisfaction of" a beneficiary's entitlement—allocating specific assets like property, shares, or investments instead of selling them. The asset transfers "as is," satisfying what the beneficiary is owed under the will or intestacy rules.

Executors typically use appropriation in three main scenarios: tax planning (transferring assets to beneficiaries before sale so they can use personal capital gains tax allowances), preserving sentimental assets (when beneficiaries want to keep specific items rather than see them sold), or investment preferences (when beneficiaries prefer certain assets over cash). Under the statutory power, beneficiaries must consent to appropriation, though many modern wills include express powers that modify this requirement. The asset must be properly valued at the time of appropriation—not the date of death—to ensure fair distribution. Executors cannot appropriate specific gifts already designated in the will, only residuary estate assets.

For example, Sarah died leaving a property worth £200,000 that had increased in value by £60,000 since her death. Instead of selling immediately (which would use only the estate's £3,000 capital gains tax allowance), her executors appropriated the property to her three children before sale. This allowed each beneficiary to use their personal £3,000 CGT allowance, creating £12,000 in total tax-free gains instead of just £3,000. The appropriation was documented in a Deed of Appropriation signed by all three children, confirming their consent and that the valuation was fair.

Timing is critical for tax planning—appropriation must occur before sale completion, particularly before exchange of contracts for property. Document appropriations in a Deed or Memorandum of Appropriation signed by beneficiaries. While appropriation is often followed by an assent (the formal legal transfer), they're distinct: appropriation is the executor's allocation decision, while assent completes the paperwork.

Common Questions

"When would an executor use appropriation instead of selling an asset?" An executor might appropriate an asset when a beneficiary wants to receive a specific property or investment instead of cash, or when appropriation offers tax advantages. For example, appropriating property or shares to beneficiaries before sale allows them to use their personal capital gains tax allowances, potentially saving thousands of pounds.

"Do beneficiaries have to agree to an appropriation?" Yes, under the statutory power in Section 41 of the Administration of Estates Act 1925, beneficiaries must consent to an appropriation. However, many modern wills include express powers that allow executors to appropriate assets without requiring consent, though seeking agreement is still considered best practice.

"Can an executor appropriate any asset, or are there restrictions?" Executors can appropriate most estate assets including property, shares, and investments, but they cannot appropriate specific gifts already left to named beneficiaries in the will. The appropriated asset must be properly valued and cannot exceed the beneficiary's entitlement under the will or intestacy rules.

Common Misconceptions

Myth: Appropriation is the same as giving someone their inheritance

Reality: Appropriation is a specific legal mechanism for transferring an asset in its existing form, not just any distribution method. When executors sell an asset and distribute cash, that's distribution but not appropriation. Appropriation specifically means allocating a non-cash asset to satisfy an entitlement, with specific legal requirements and documentation.

Myth: Executors need beneficiary consent to appropriate any asset

Reality: Consent requirements depend on the source of the power. Under the statutory power (Administration of Estates Act 1925, Section 41), beneficiary consent is required. However, most modern professionally-drafted wills include express appropriation powers that allow executors to appropriate without consent, though best practice is to seek agreement regardless.

  • Assent: The formal transfer document that completes an appropriation by legally transferring the asset.
  • Executor: The person who exercises appropriation powers when administering the estate.
  • Beneficiary: The recipient of appropriated assets who must consent under statutory powers.
  • Estate Distribution: The broader distribution process, with appropriation as an alternative to asset sales.
  • Residuary Estate: The estate portion from which executors appropriate, as specific gifts cannot be appropriated.

Need Help with Your Will?

Clear instructions in your will make estate administration straightforward for your executors. Including express appropriation powers can give them valuable flexibility in distributing your estate tax-efficiently.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.