Inherited property in trust

[jks]

Five years ago my late father left 3 properties to myself and my brother in trust for 10 years. The will did not state the type of trust though we are entitled to the rental income so would assume it to be seen as an interest in possession trust. Having already paid 170k IHT it would appear there could be a CGT to pay. I have agreement to bring them out of trust early if this is advisable. I worry about the size of the CGT after 10 years. Do the properties have to come out of trust together or could we do one each year? Also if we left them in trust for 10 years could we then leave them in trust indefinately or would we have to create another trust thus giving a CGT liability anyway. We never intend to sell the properties. Any advice would be very welcomed!

[Lee Young]

You could take them out one at a time, and that would help to minimise the CGT payable by the trustees on the disposal.

The trust can most likely last 80 years, or until each death. If you left the properties in the trust till you died then the capital gain would be wiped away but the value of your share of the trust would be added to your estste for IHT purposes and the whole lot taxed accordingly.

This is all on the basis that the trust is an interest in possession trust. If not then hold over relief could be available to defer the CGT if the trustees paid over the properties to you free from the terms of the trust.

However you refer to "in trust for 10 years" Why such a short period?

[jks]

The will stated they were to be in trust for ten years. My father was aware my brother was in an unhappy marriage and was concerned that if he willed the properties directly they could potentially become part of any future divorce. Even if the will states ten years would it still be okay to leave them in trust longer without incurring CGT? The will does not state it is an IIP - it does not state what type of trust and there is no trust deed.We assumed it would be deemed as one as we are receiving rental income. and

[Lee Young]

Without the copy wil (which is the trust deed for these purposes) I could not categorically comment on what could or should happen or the tax treatement, but generally if the trust comes to an end after x years that will give rise to an inescapable tax charge at that point. Earlier action may be possible to prevent or reduce it.