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Property trust


bil8999

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You can "gift" your property to your Daughter under current IT rules. You have to survive for 7 years for the gift to become permanent. After 3 years into the 7 years the remaining 4 years are on a sliding scale of tax payable should you die within the 7 year rule.

I

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Has anyone had experience with leaving properties in a trust fund to their dependents? Knowing very little about trust funds is this a option to avoid IT and also protect the property from greedy partners if the dependents relationships break up? I would hate to think of a share of a asset I had worked hard for being passed over to a unrelated party because they lived with one of my kids for a couple of years.    

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Yes, I had a trust set up over 10 years ago to reduce inheritance tax specifically relating to some of my property portfolio...I believe it was called a Discretionary Trust. It was/ is complicated and of course there have been lots of changes to the rules/ law in that time.

I don't remember the details so would need to pull out all the paperwork which I just don't have time for at the moment.

Note: beware they are not cheap, as I remember mine cost over £2K to put in place, but, the potential savings are big.

It works by putting some of the value of the portfolio into the ownership of family members (only at the time of your death) & out of the your Estate and therefore out of the clutches of Inheritance tax.

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Grampa,

Unfortunately if you gift or bequeath assets to someone, it usually has to be unconditional. That means you have no subsequent control over those assets. 

The only exception that I know of is where an asset passes to your wife on your death but you will that she looses the asset if she remarries.....which is specifically designed to address the situation you have highlighted.

We are getting into the territory of needing experienced legal advice.

I'd recommend anyone wanting to arrange a trust to get legal advice.

I used the following firm to set up my Trust......St. James's Place Wealth Management.  Just search the net for them,  they are easy to find.

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On 01/11/2016 at 5:41 PM, bil8999 said:

Hi Melboy, did you have to pay CGT? 

  If you go to  https://www.gov.uk/inheritance-tax/gifts you have all the criteria for IT and the current rules on gifting money and property.

It really is that easy to gift a property through a solicitor and the Sol. will inform HMRC of the reasons etc. and they obviously keep a record of the 7 year rule.

.

 

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I have done the same as Melboy and in fact our son legally owns this property now but I pay the maintenance but draw the income from the property ( 4 flats including ours ) our Holiday rental is in my wifes name and she is making it over to our son at present through our solicitor, the other properties we will change over to our daughter next year ( we would have done it before ,but as a divorce from her husband is on the cards  we have decided to leave it to its all settled.  

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I have no intention of signing any of my properties over to my offspring, they might get something when I'm gone.........but only if there is anything left.

I believe in letting them make their own way in life with minimal assistance from me. Fortunately, all are doing very nicely without my help.

Keeping the assets myself means I retain access to equity that can be reinvested.

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Tax is payable even when no money changes hands. This includes gifts and transfers of property into a limited company.

CGT.........is it payable ?  = yes, it's payable on disposal including gift or sale. It's payable on the difference between purchase price and value at date of transfer. There are allowances that can be offset. Slightly different rules apply if it has been the owners PPR.

SDLT........is it payable ? = no, it doesn't apply if property is gifted (without a mortgage).

IHT........is it payable ? = the 7 year rule applies unless property transfered into a Discretionary Trust.

This reply is simplified and if you are unsure you should check on line for more details. Tax treatment of gifts is very adequately covered on the internet.

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On 02/11/2016 at 7:39 PM, Richlist said:

Tax is payable even when no money changes hands. This includes gifts and transfers of property into a limited company.

CGT.........is it payable ?  = yes, it's payable on disposal including gift or sale. It's payable on the difference between purchase price and value at date of transfer. There are allowances that can be offset.

 

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Melboy,

Your earlier post raises some worrying concerns....

1. Capital Gains Tax (CGT) is most definitely due on disposal  i.e. when property is sold or transferred or gifted. However, everyone has an annual personal allowance of around £11K. If the property is held in joint names that allowance is doubled. You also get an allowance for the original purchase costs and the legal fees on disposal, together with any capital expenditure you have made during the period of ownership. Added up this can come to around £25K -£30K or more. So if the increase in the value of the property is less.....there is no CGT payable.

2. You seem to be confusing CGT with Inheritance Tax (IHT). They are totally separate taxes and are subject to completely separate rules. The 7 year rule relates only to IHT.

3. Your solicitor may well inform HMRC about your liability regarding IHT but CGT is a personal tax. The details of property disposal, transfer and gifts should be submitted by YOU as part of your self assessment tax returns. Unless your solicitor (or accountant) has done this for you....You are responsible for notifying HMRC.

4. I find it extremely unlikely that having gifted a property to someone else, you can then determine what that person decides to do with that property in the future, after your death.

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On 31/10/2016 at 7:43 PM, bil8999 said:

Not Ltd company, exploring ways of gifting my properties to daughter without paying hefty CGT, been told to look at property trusts or shares in company.

 

Quite possibly RL but I am responding to bil8999 original question.

 

So perhaps yes, bil8999 does need to seek professional advice as all individual personal circumstances may be different.

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Your reply is still is still very mixed up.

Bil8999 is clearly asking about gifting and CGT..... not gifting and  IHT which is an entirely different thing.

One of the main reasons most people do not gift property in their lifetime is because many are faced with a Capital Gains Tax liability without any sale proceeds from which to pay it.

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On 03/11/2016 at 9:21 AM, Richlist said:

Your reply is still is still very mixed up.

 

I was offering bil8999 an alternative suggestion in my reply (4th down) to his original question. Whatever path you take the object is to legally take that asset out of HMRC tax liability to you.

The rules change nearly every year and they change again in April 2017.

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Thanks to all, will seek professional advise and let you know the outcome.

If as I suspect I will have to pay CGT, it will be quite substantial as I have owned some of these properties for 35 years paying just hundreds of pounds, which at the time I thought was quite a lot.

Regards

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There used to be a loophole in order to completely avoid CGT. As I remember it required the property owner to move lock, stock and barrel to Belgium for a minimum of 5 years.

I don't know if that opportunity still exists but as someone who spent a year working in Belgium a few years back, I can understand how some would rather just pay the tax ?. In fact, Belgium was so good, we used to drive over the border into Holland each evening to stay in a Dutch hotel.

If you want to avoid CGT you might like to investigate further.

......I investigated and this opportunity is still available......honest.

You have to become non UK resident for at least 5 years and any disposals are free of CGT. Belgium CGT rate is 0%.

There are other countries available.......not all of them are as good (or bad) as Belgium.

Run a web search, just type 'avoiding  UK CGT by moving to Belgium '  into your browser.

Good luck and Bob voyage ?

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