Trusts and Tax?

[Spinal]

I know I need to speak to a solicitor... but as always, I like walking into things prepared.

So a few questions, if I set up a trust, and want to transfer my house into the trust (and in the house I currently live in) setting myself and one other as the trustee (and beneficiaries); is inheritance tax applicable if I live more than 7 years?

Next, how is the property value calculated? from what I understand, even if the tax is applicable, if the property is worth less than £325,000 then the tax is 0%. The house was bought in 2000 for £300,000 (no mortgage); would that value be used, or would current market rates in the area apply? If so, who does the valuation?

Finally - stamp duty. Does this apply to transfers to a trust? I presume so... right?

Finally(2) - can anyone recommend a solicitor to talk to with regards to this?

M.

 

[st4]

I think the final question re the solicitor is the one you should focus on

 

[Dieselman]

Doesn't Kaka have a family full of Solicitors...

 

[Dieselman]

I might be wrong, but can't see how you can put an estate in trust with yourself as a beneficiary.

 

[Charles Morgan]

You can't be a trustee as a beneficiary.

 

[nick mercedes]

Doesn't Kaka have a family full of Solicitors...

Pay them in pizzas.

 

[renault12ts]

I know I need to speak to a solicitor... but as always, I like walking into things prepared.

So a few questions, if I set up a trust, and want to transfer my house into the trust (and in the house I currently live in) setting myself and one other as the trustee (and beneficiaries); is inheritance tax applicable if I live more than 7 years?

Next, how is the property value calculated? from what I understand, even if the tax is applicable, if the property is worth less than £325,000 then the tax is 0%. The house was bought in 2000 for £300,000 (no mortgage); would that value be used, or would current market rates in the area apply? If so, who does the valuation?

Finally - stamp duty. Does this apply to transfers to a trust? I presume so... right?

Finally(2) - can anyone recommend a solicitor to talk to with regards to this?

M.

IHT is based on the total value of your estate not just your house...at the date of death. Any unused IHT nil rate can be transferred to the surviving spouse for use on second death. So, if your combined estates are worth less than the combined IHT nil rate threshold (£650,000)...don't worry too much.

By transferring the house into a trust and having yourself as a potential beneficiary...you are doing nothing to mitigate against IHT, because you haven't given it away, you have a reservation on it.

To mitigate IHT (and start the seven year clock running), you must give the house away with out reservation. This means you can no longer have any say about that house.

 

[nick mercedes]

IHT is based on the total value of your estate not just your house.

By transferring the house into a trust and having yourself as a potential beneficiary...you are doing nothing to mitigate against IHT, because you haven't given it away, you have a reservation on it.

To mitigate IHT (and start the seven year clock running), you must give the house away with out reservation. This means you can no longer have any say about that house.

So if he gives it away and falls off the climbing wall before the 7 years is up, who ever cops his cash will still have to pay tax?

 

[renault12ts]

You can't be a trustee as a beneficiary.

You can Charles...and very very often this is done.

 

[renault12ts]

So if he gives it away and falls off the climbing wall before the 7 years is up, who ever cops his cash will still have to pay tax?

Yes...the asset will remain within his estate for the full 7 years. After the first 3 years the tax payable (if any) will reduce. But the nil rate band or portion thereof will not be regained until the 7 years has ended.

 

[Charles Morgan]

You can Charles...and very very often this is done.

I'm reading across too much from having been a charity trustee, when you can't make a grant as a trustee from which you might benefit.

 

[DITTRICH]

Start reading at the HMRC website for FREE:-

HM Revenue & Customs: Trusts

Then go and see a solicitor.

What you are proposing was, last time I looked many years ago, not possible to achieve unless certain conditions were fulfilled. The problem of a gift with reservation will apply since you are still going to live in the property which you are giving to the trust. See below for a start.

Lifetime transfers: introduction to gifts with reservation of benefit

Trusts are a bit of a mine field with inheritance tax and capital gains tax high on the agenda. Closely followed by your domicile. Take care and TAKE CURRENT PROFESSIONAL ADVICE FROM SOMEONE WHO SPECIALISES IN THIS AREA (and who you can sue if they get it wrong).

 

[WesLangdon]

I find this way of thinking slightly reprehensible why do you wish to avoid inhertance tax. Taxes pay for the NHS, education, public services in general, it even goes towards the military and the upkeep of the Royal family [neither of which meet with my approval]

 

[nick mercedes]

I find this way of thinking slightly reprehensible why do you wish to avoid inhertance tax. Taxes pay for the NHS, education, public services in general, it even goes towards the military and the upkeep of the Royal family [neither of which meet with my approval]

A bit like Amazon, innit.

Wealthy foreigner lands here, likes lifestyle and benefits that living in the UK brings, but objects to paying tax here.

Perhaps it's time we started pointing these people to the exit?

 

[C240Sport97]

sounds like you need tax (inheritance probably) advice.

not sure that your trust idea will do the job you want it to do.

generally speaking, if you are a beneficiary of a trust that you set up, you are unlikely to get any tax benefit as you will still be enjoying the asset.

 

[124fan]

just wondering how this line of enquiry finished up? tia

 

[developer]

Around a third of the contributors got permanently banned soon afterwards - that must be a record for a 15 post thread .

 

[John Jones Jr]

Deleted, as just realised thread is almost a year old.