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Where Taxpayers and Advisers Meet

Declaration of trust - Beneficial interest

Jholm
Posts:360
Joined:Mon Mar 11, 2019 4:22 pm
Declaration of trust - Beneficial interest

Postby Jholm » Thu Mar 31, 2022 4:06 pm

Hi all,

A declaration of trust specifies the transfer of beneficial interest from 50/50 to 100/0 from one unmarried partner to the other. The intention of this being to assign the income/capital upon sale to just one party.

The deed specifies no transfer of underlying ownership and the property remains held jointly as tenants in common. Despite a 0% interest in the future sale proceeds, the owner assigning the rights will retain some legal ownership and the property cannot be sold without both parties agreeing.

Is this an event for CGT purposes?

I am getting quite mixed opinions on the matter and would be grateful for your thoughts.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Declaration of trust - Beneficial interest

Postby maths » Thu Mar 31, 2022 7:25 pm

The legal title is in joint names (say, X and Y). Legal title can only be held jointly and not as you state, tenants in common. Thus, on the death of one co-owner the survivor automatically becomes the sole holder of the legal title.

Under a declaration of trust (DoT) which will be executed by both X and Y, X and Y declare that the beneficial interest in the property is, henceforth, to be held as to, say, 100% X and 0% Y.

If prior to execution of the DoT the beneficial ownership as between X and Y was 50/50 then there has been a CGT event ie Y has disposed of the 50% of their beneficial interest to X.
A CGT charge thus arises on an amount which will depend upon the figures. Market value will apply.

The transfer will also be a gift for IHT (albeit a PET).

With respect to income arising from the property this may be split as X and Y agree; it does not need to be X 100%/Y 0%. Form 17 is also irrelevant.

Jholm
Posts:360
Joined:Mon Mar 11, 2019 4:22 pm

Re: Declaration of trust - Beneficial interest

Postby Jholm » Fri Apr 01, 2022 9:06 am

Thank you M

joeheard
Posts:1
Joined:Thu Apr 28, 2022 1:41 am

Re: Declaration of trust - Beneficial interest

Postby joeheard » Thu Apr 28, 2022 1:44 am

The legal title is in joint names (say, X and Y). Legal title can only be held jointly and not as you state, tenants in common. Thus, on the death of one co-owner the survivor automatically becomes the sole holder of the legal title.

Under a declaration of trust (DoT) which will be executed by both X and Y, X and Y declare that the beneficial interest in the property is, henceforth, to be held as to, say, 100% X and 0% Y.

If prior to execution of the DoT the beneficial ownership as between X and Y was 50/50 then there has been a CGT event ie Y has disposed of the 50% of their beneficial interest to X.
A CGT charge thus arises on an amount which will depend upon the figures. Market value will apply.

The transfer will also be a gift for IHT (albeit a PET).

With respect to income arising from the property this may be split as X and Y agree; it does not need to be X 100%/Y 0%. Form 17 is also irrelevant.
hello,
does this rule about joint tenants apply in USA too?


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