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Where Taxpayers and Advisers Meet

Main property

CIL1875
Posts:3
Joined:Tue Feb 15, 2022 11:44 am
Main property

Postby CIL1875 » Tue Feb 15, 2022 11:47 am

My mother in law is looking at placing her £700k property into a trust and trying to work out tax implication. She is divorced, no debt on the property. Has 4 children who will ultimately be beneficiaries. What trust is best to avoid IHT.

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

Re: Main property

Postby Jholm » Tue Feb 15, 2022 1:23 pm

Other than the potential for immediately paying lifetime IHT and CGT, what makes her want to place the property in a trust?

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

Re: Main property

Postby Jholm » Tue Feb 15, 2022 1:24 pm

Also, please specify... is this her main home?

CIL1875
Posts:3
Joined:Tue Feb 15, 2022 11:44 am

Re: Main property

Postby CIL1875 » Tue Feb 15, 2022 1:38 pm

Is her main property and ultimately want to save IHT. Am aware of the immediate 20% tax charge and CGT issues.

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

Re: Main property

Postby Jholm » Tue Feb 15, 2022 5:22 pm

Is/was she married?

Does she have anything else in her estate?

Depending on the full facts, it's possible no IHT would be due (using mixture of NRB and RNRB + potential for transferable NRB/RNRB if a surviving spouse). In this case, it may cost more to put it into a trust due to CGT if nothing else.

CIL1875
Posts:3
Joined:Tue Feb 15, 2022 11:44 am

Re: Main property

Postby CIL1875 » Tue Feb 15, 2022 5:34 pm

Divorced. Approx £400k cash as well. Only has her NRB and RNRB available.

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

Re: Main property

Postby maths » Tue Feb 15, 2022 7:31 pm

There seems to be little tax sense to the proposal.

If IHT is to be avoided on death she can simply sell and give cash to children; she can give house to children and not live in it; she can give house to child and live in it and pay a rent; she can downsize and give surplus cash to children; she can give part of house to a child who lives with her.

Trust option (whatever that is) seems unattractive.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Main property

Postby AGoodman » Fri Feb 18, 2022 12:15 pm

As others have said, she would have an immediate £75k inheritance tax bill and, assuming she lives there, no tax saving on death. Plus CGT if/when the property is sold or comes out of the trust.

Unless there are some very specific circumstances, it's highly unlikely to save any tax and quite likely to result in extra tax.


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