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Where Taxpayers and Advisers Meet

Property in settlement

Andrew01
Posts:26
Joined:Wed Aug 06, 2008 3:27 pm
Property in settlement

Postby Andrew01 » Tue Apr 12, 2022 11:02 pm

Hello IHT and Trust forum

A solicitor said holding property within a Trust is "messy"
At the time I did not ask him to explain why it is "messy" as there were other points to be covered.

Cons
OK, we have the periodic and exit charges on Trust.
So if the trust's assets are above the Nil Rate band the trustees need cash to pay the IHT bill.
1, So if the only asset in the trust is a property I could understand there could be problems for the trustees paying IHT bills.
2, Maintenance of the property if this trusts only asset where the maintenance money coming from.
4, improvements to the property someone is possibly adding value to the settlement if the money to pay for the improvements is not coming from the settlement itself.

Pros
1, The property if not rented out etc would not be producing any income, so a simple annual Trust income tax return.
2, Can use a Beneficiaries principal private residents relief no CGT on property in the trust.
3, Improvements to the property if only a part share of a property is owned by the settlement. Would a part share get around any improvements adding value if the trustees did not pay for the improvements, as the settlements share of the property would decline percentage-wise depending on the improvement uplift, this was my own idea.

regards
Andrew

AGoodman
Posts:1449
Joined:Fri May 16, 2014 3:47 pm

Re: Property in settlement

Postby AGoodman » Wed Apr 13, 2022 8:19 am

You could fund improvements by way of a part owner but you would need (1) accurate valuations before and after (2) to redocument the beneficial ownership and you would still be left with some uncertainty over whether the additional value accruing to the other owner (funding the works) should be the cost of the works or the increase in value as a result of the works.

I would not describe it as simple.


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