Should we form a trust

[fitz]

Some time ago a Forum contributor advised us that as my brother, myself and our mother had each contributed one third to the cost of a home for our mother, who lives there alone (held as tenants in common) it would be better to put the property into trust. Should we do so it would then be possible to obtain the “benefit of the uplift” in market value on the death of a beneficiary living in the property

It was also stated that it would work best if the purchase was recent and not too much gain had already been made. The purchase was made only one year ago, and if anything the value has slightly diminished. As things stand we understood that on the death of our mother her third share would not be subject to capital gains tax but our two thirds would attract CGT.

Could anyone explain exactly what *benefit of the uplift “ means, and is it a more advantageous solution. What sort of trust should it be, and is trust formation a task for a lawyer or a tax consultant.

[Anthony Nixon]

The advantage is capital gains tax (CGT).

Since neither your brother or you lives at the property you will be liable to CGT on your one third of any increase in the value of the property from the price you paid to the price you receive when you sell.#

By creating a trust allowing your mother to live in the property you can all take advantage of your mother's CGT exemption for her main home which is given to the whole of the trust's gain. So any sale then becomes CGT free whatever the gain.

Preparing a trust is a job for a lawyer and I suggest a lawyer who specialises in trusts. Look for someone who is a member of the Society of Trust and Estate Practitioners (STEP).

Anthony Nixon
Partner
Lester Aldridge Solicitors
Alleyn House
Carlton Crescent
Southampton
SO15 2EU

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