Unscrambling Estate Protection Scheme

[JSkeates]

Several years ago we entered into a "Double Trust" estate protection scheme to take my mothers house out of any future estate for IHT purposes. This has now fallen foul of the new POAT legislation.
If we elect to have the house treated as part of any future estate, will there then be a CGT liability if my mother sells the property prior to her death?

[johnfkavanagh]

If you implemented the "Double Trust" arrangement as I understand it, the house is probably now owned by the trustees of a trust in which your mother has a life interest. So it would be the trustees (of whom your mother may indeed be one) who would be selling the property.

Where trustees permit a beneficiary to occupy a property under the terms of the trust and that property is the beneficiary's main residence, any gain attributable to the period of residence qualifies for the main residence exemption. It therefore follows that the main residence exemption will continue to apply while your mother lives in the property as her main residence.

As a general note of caution, may I just say that the decision to elect into IHT should not be taken lightly or without detailed exploration of the other possibilities which exist.

John Kavanagh
UK Tax Consulting Ltd
Chartered Tax Advisers
www.uktaxconsulting.co.uk
mail@uktaxconsulting.com
Tel: 020 7060 1660
Fax: 020 7060 1663

[Anthony Nixon]

I fully agree with John.

The election back into IHT (which is what the govenment want those who entered into schemes like this to do) does not have to be made until 31 January 2007.

There are other options. Since your mother will already have spent a lot of money on setting up the double trust scheme it is worth exploring these thoroughly.

This is something my firm is doing actively for a number of people of who have gone into schemes that are now caught by the pre-owned assets regime. Do give me a call if you would like to discuss the options further - on a no obligaton basis.

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

Tel: 023 8082 0442
Mob: 07881 920742
Fax: 023 8082 0441
Email: anthony.nixon@la-law.com
Website:www.lester-aldridge.com