Section 144: appointments from will trusts

Q: What is section 144 typically used for?

Spouse exemption. Appointing to a surviving spouse or civil partner makes that part of the estate exempt on the first death and restores unused nil rate band for a later claim; see nil rate band discretionary will trusts. Charity exemption. IHTM42227 confirms that if property is appointed to a charity, charity exemption applies on the death. Residence nil rate band. A home left on discretionary trusts is not closely inherited at death. IHTM46033 says an appointment under section 144 to a direct descendant is treated as though that descendant had inherited the property on the death; see the residence nil rate band. Avoiding later trust charges. Property appointed out within two years escapes the exit and ten year charges that would otherwise apply; see trust exit charges. Where the appointment reduces the tax on the estate, IHTM35184 indicates a repayment may follow once HMRC accepts that the section applies.

Q: How does this work in practice?

Illustration only. Priya dies leaving her whole estate of £900,000, which contains no home and no business assets, on discretionary trusts for her husband, children and grandchildren. She made no lifetime gifts and the nil rate band is £325,000. On her death the estate is taxed as a gift to a discretionary trust: 40% of £575,000 is £230,000. Fourteen months later the trustees appoint the whole trust fund to her husband absolutely. Section 144 treats the will as having left everything to him, so the estate becomes wholly spouse exempt and the tax already paid falls to be repaid. Priya's nil rate band is then unused and can be transferred to her husband's estate. Had the trustees waited until after the second anniversary of her death, the death tax would have stood and the appointment would have been an exit from the trust.

Section 144 of the Inheritance Tax Act 1984 lets trustees of a discretionary trust created by a will decide who benefits after the death, and if they act within two years, inheritance tax treats the will as if it had left the property that way from the start. There is no exit charge on the appointment, any exemption for the new recipient applies to the death estate, and no election is needed, but capital gains tax does not follow the same rule.

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What does section 144 actually do?

Many wills leave all or part of an estate on discretionary trusts so that the family can decide later who should benefit. Without a special rule, a distribution from such a trust would be an exit from a relevant property trust, and the will would have been taxed on death as a gift to a discretionary trust. Section 144(2) changes both. Where it applies, tax is not charged on the distribution, and the Act has effect as if the will had provided that on the testator’s death the property should be held as it is held after the event. HMRC’s manual at IHTM35181 describes this as operating in a similar way to a deed of variation under section 142.

IHTM35184 sets out the practical consequences: there is no need for the trustees to complete an IHT100 for the distribution, any exemption appropriate to the beneficiary becomes available, and the tax on the testator’s estate is recalculated on that basis.

Which conditions must be met?

Section 144(1) and IHTM35182 require all of the following:

the property was in the deceased’s estate immediately before death and was settled by the will, not by a lifetime trust;
the event happens within two years after the death;
no interest in possession has yet subsisted in the property. For deaths on or after 22 March 2006, section 144(1A) limits this to an immediate post death interest or a disabled person’s interest; and
the event would be chargeable under the relevant property rules (other than the ten year charge in section 64 or the section 79 heritage charge), or would be chargeable but for the reliefs for property going to charities, political parties, employee trusts, national bodies and maintenance funds, or, for deaths on or after 10 December 2014, the first quarter rule in section 65(4).

HMRC lists cases where the section cannot apply, including property given by will for immediate absolute distribution at the discretion of the executors or others. Wording that lets executors simply choose recipients, without creating a trust, is therefore not enough.

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What about appointments in the first three months?

Section 65(4) prevents an exit charge on a distribution in the first quarter after a trust begins. For deaths before 10 December 2014 that meant an appointment in the first three months was not a chargeable event, so section 144 could not read it back. HMRC’s interpretation was upheld in Frankland v IRC (1997). IHTM42227 explains the effect: before the change, the original trust was still treated as set up, and property appointed to a charity in the first quarter could not attract charity exemption on the death. For deaths on or after 10 December 2014, amendments made in the summer Finance Bill 2015 remove the trap, and an appointment in the first quarter now qualifies (IHTM35182).

Can an appointment create a life interest or a trust for children?

Yes. Without express provision, an appointment creating one of the trust types introduced in 2006 would not be a chargeable event, so section 144 could not read it back (IHTM35182). Section 144(3) to (6), added by the Finance Act 2006, now read back an event within two years that causes property to be held on trusts which, had the will set them up, would have produced an immediate post death interest or a trust within section 71A (bereaved minors) or section 71D (18 to 25 trusts). See interest in possession trusts and bereaved minors and 18 to 25 trusts.

HMRC warns at IHTM35182 that section 144 works on events, and an event can happen without any decision by the trustees. In its example, a beneficiary who reaches 18 within two years of the death becomes entitled to income under section 31 of the Trustee Act 1925, and section 144 automatically treats that beneficiary as having had an immediate post death interest from the death.

What is section 144 typically used for?

Spouse exemption. Appointing to a surviving spouse or civil partner makes that part of the estate exempt on the first death and restores unused nil rate band for a later claim; see nil rate band discretionary will trusts.
Charity exemption. IHTM42227 confirms that if property is appointed to a charity, charity exemption applies on the death.
Residence nil rate band. A home left on discretionary trusts is not closely inherited at death. IHTM46033 says an appointment under section 144 to a direct descendant is treated as though that descendant had inherited the property on the death; see the residence nil rate band.
Avoiding later trust charges. Property appointed out within two years escapes the exit and ten year charges that would otherwise apply; see trust exit charges.

Where the appointment reduces the tax on the estate, IHTM35184 indicates a repayment may follow once HMRC accepts that the section applies.

What limits does HMRC apply?

IHTM35183 says that, unlike a variation, an appointment needs no election or statement of intent. HMRC will not, however, accept an appointment in favour of a beneficiary who was dead at the date of the appointment. A discretionary beneficiary’s right to benefit ends on death, so an appointment to a spouse who has already died cannot create a spouse exemption on the first estate, and cannot increase the nil rate band available to transfer to the survivor’s estate.

Section 144 and section 142 can be combined. IHTM35085 accepts a variation or disclaimer after a section 144 event, and a section 144 event after a variation has created a discretionary trust or added property to one. A variation by the beneficiaries themselves is explained in deeds of variation.

What happens for capital gains tax?

There is no capital gains tax equivalent. HMRC’s Capital Gains Manual at CG31430 says that if the trustees appoint after assets have vested in them, the appointment making a beneficiary absolutely entitled is a disposal by the trustees. If they appoint before the assets have vested, while they are still held by the personal representatives, the beneficiary is treated as taking as legatee and acquires the assets at probate value. Timing the appointment around the completion of the administration can therefore change the gains position.

Holdover relief is also affected. IHTM42117 explains that because a section 144 appointment is not a chargeable event for inheritance tax, gains holdover relief under section 260 of the Taxation of Chargeable Gains Act 1992 is not available on it. Our page on holdover relief covers that relief.

How does this work in practice?

Illustration only. Priya dies leaving her whole estate of £900,000, which contains no home and no business assets, on discretionary trusts for her husband, children and grandchildren. She made no lifetime gifts and the nil rate band is £325,000. On her death the estate is taxed as a gift to a discretionary trust: 40% of £575,000 is £230,000.

Fourteen months later the trustees appoint the whole trust fund to her husband absolutely. Section 144 treats the will as having left everything to him, so the estate becomes wholly spouse exempt and the tax already paid falls to be repaid. Priya’s nil rate band is then unused and can be transferred to her husband’s estate. Had the trustees waited until after the second anniversary of her death, the death tax would have stood and the appointment would have been an exit from the trust.

What mistakes come up most often?

Letting the two year period pass without a decision.
Relying on an executors’ discretion to distribute rather than a trust, which section 144 does not cover.
Overlooking events that happen automatically, such as a beneficiary reaching 18.
Appointing to a spouse after the spouse has died.
Assuming capital gains tax is read back too, or expecting holdover relief on the appointment.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.