Adding children to deeds to bypass IHT

[simplyflorida]

My wife and I currently own a property valued at around £300,000 and are considering buying a couple of properties to rent out. Is it possible to add our two young children (aged 9 and 6) to the deeds as owners of the new properties so that when my wife and I die, the properties pass to them and so avoid any IHT.

[accountant@uktaxshop]

In terms of adding you children to the deeds of properties I belive (please anyone correct me if I am wrong) you have to be 18 to own a property.

They would also of course then be liable for a portion of the rental incomes.

One way of doing something like this, would be to use a trust fund, with your children being the beneficiaries. I am not an expert in this area - but I can put you in contact with someone who is if you want to give me a call. I mainly deal with tax returns and planning the best way to minimise your CGT and income taxes.


James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436

[John Day]

This is not a simple area and I would strongly reccomend you speak to an accountant or tax adviser local to you. Broadly speaking, however, the following points should be considered:

1. Yes, it is possible for minors to own property although it would have to be done by someone (usually a parent) acting as "bare trustee".

2. Unless the children are contributing there own funds towards the purchase (ie you are providing the funds) then income arising will be taxed on you as their parents until they are 18.

3. IHT seems to be your main concern; can I suggest you look at your estates and wills to see if they should be redrawn to effectively use both your own and your wife's "nil - rate" bands? On present rates, assets of £510,000 can avoid IHT in a husband and wife situation (if the wills are drawn correctly), which may address your problem.

[timbo33]

John is right, using correctly drawn wills utilising a Nil Rate Band Discretionary Trust and a Reversionary IOU Scheme is a cheaper (£500?) and more effective way of beating IHT in the first instance.

Assuming that you are relatively young, I would suggest it is premature to do any more serious IHT planning as you don't yet know what is 'spare' in your estate. IHT planning, however clever, still involves loss of some enjoyment of your assets and/or income and so you must look to your current needs as being first priority.

Timbo - IFA