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Gift property to a trust for children

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Joined: Wed Aug 06, 2008 3:47 pm

Postby Grandmother » Tue Dec 12, 2006 10:08 am

I am considering setting up a trust for my grandchildren(4,9,10), and gifting my current home to it. (I will move to another property)My son, the children's father will be the main trustee. I will not retain an interest in the property or the trust
This house is likely to be let and later sold
1 I assume there will be no capital gains on making the gift, but there could be IHT if I die within 7 years
2 How would the income from the property be taxed
3If/when the house is sold what tax would arise?
4 Could I gift a property if it has a mortgage on it
5 Does my son's tax position in any way affect the taxation of the income or the propertyy sale(he will not be a beneficiary)

Simon Sweetman
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Joined: Wed Aug 06, 2008 3:11 pm

Postby Simon Sweetman » Wed Dec 13, 2006 4:58 am

This may not be a good idea.

First of all, there may be capital gains on the gift unless you can claim rollover relief. Assuming that this is a discretionary trust it is a lifetime gift for IHT (NOT a potentially exempt transfer) and you can hold over the CGT : but if the value exceeds the IHT nil rate band you will have to pay some IHT at 20%.

The income will be taxed on the trustees and will all be taxed at 40%.

When it is sold there will be a substantial CGT charge (based on what you paid for the property originally) - all at 40%.

Yes, you can gift a property with a mortgage on it but will need to clear this with the mortgage lender.

Your son's tax position is not relevant.

Posts: 22
Joined: Wed Aug 06, 2008 3:47 pm

Postby Grandmother » Wed Dec 13, 2006 8:51 am

Thankyou for this:
I assumed that as the gift was my main residence, that CGT would not be due. But you say this may not be the case. I don't understand rollover relief in relation to private residence
Would there be IHT even after 7 years??

From what I have read, while the trust may be taxed at 40%, if the beneficiaries are not liable to tax, or at a lower rate they can claim the tax back. Please confirm

So if the trust sells the property, the value is not taken at the time of becoming part of the trust, but when I bought it - in 1984??
Horrendous!! Is that what you mean?

Perhaps you could advise what would be a good idea!! - to reduce Inheritance Tax


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Joined: Wed Aug 06, 2008 3:50 pm

Postby bimhead » Fri Mar 02, 2007 11:31 am

You could sell the property, which as your first property is capital gains free of course, and then invest in woodlands, which then you can gift to anyone with no inheritance tax liability (I think). Or alternativly stop worrying about them. I'm sure what they want is for you to be happy, its your home, stay there until you die if you want. So then IHT is paid before will payout, so what? I'm in this situation, and it is really driving me crazy this thing of parents moving into smaller and crappy accomodation for no other reason whatsoever other than to limit IHT liabity. I don't want that sort of money. However if YOU really want to move somewhere else, without any outside influence whatsoever, then do so. But for goodness sake dont kill yourself for children or grandren, thats a mad way of thinking. They'll be OK.

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Joined: Wed Aug 06, 2008 3:54 pm

Postby raque1we1ch » Wed Jun 20, 2007 5:15 am

My partner of 6 years has just dropped a bombshell by telling me that the house that he bought for £34,000 (and we live in) 25 years ago, he has left in trust to his two grown up children. The house is now worth £700,000 and am wondering if he has just made it up because of the co-habitation laws that may be coming in next year.
he says that he did this about 8 years ago? What would be the implications of this?

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