Advice please

[JayHoe]

Fantastic Gengulphus.

So in all likelihood: No CGT, No IHT.

I presume I just need to talk to a solicitor re setting up a trust - the purchase is in my name, using the proceeds of her house sale with her as named beneficiary.

Then I own the new house (or does she? or does the trust?), she as beneficiary gets the rent, she pays us for her costs, tax from rent is hers. I can handle everything as I currently have POA and will be a trustee

On her death I presume the trust dissolves and I inherit, no IHT, no CGT

Is my understanding sound? If you can just straighten any misunderstandings there I would appreciate it. I will look to contact the solicitors in a few days.

Thank you sooo much. Have a virtual beer on me!

[stewamax]

It's probably bad form for someone off-thread to congratulate a poster on a post, but I would like to do so to Gengulphus for the immediately preceding one!

[Gengulphus]

I presume I just need to talk to a solicitor re setting up a trust - the purchase is in my name, using the proceeds of her house sale with her as named beneficiary.

Then I own the new house (or does she? or does the trust?), she as beneficiary gets the rent, she pays us for her costs, tax from rent is hers. I can handle everything as I currently have POA and will be a trustee

On her death I presume the trust dissolves and I inherit, no IHT, no CGT

Is my understanding sound? If you can just straighten any misunderstandings there I would appreciate it. I will look to contact the solicitors in a few days.

Sorry - I've got a decent understanding of CGT and IHT, and of the principles of how assets in a trust are owned (basically, she is the owner in the sense of being entitled to the benefits of those assets, such as the net rental income, the trust is the owner in the sense of having legal control of the assets, and the trustees are in legal control of the trust).

But as my last post said at its end, I'm totally inexpert about the admin of trusts! For exactly what is involved in setting one up, making sure it is dissolved when there's no further need for it, what trust accounts and tax returns are needed, etc, I'll have to refer you to others. If I were in your position, yes, a solicitor would be my first port of call - but my approach would be very much along the lines of "Here's the situation... Someone's suggested that owning the new house via a trust might be a good solution. Could you advise whether it is, and if so, what type of trust is needed and what's involved in setting it up, running it, and bringing it to an end when she dies?"

Gengulphus

[Mike88]

It was my understanding that if property was gifted such a transaction would be subject to stamp duty and how such a transfer fits in with the double ownership issues surrounding stamp duty might well apply. If the original poster and his mother haven't the money to update the property has he the cash to pay stamp duty? Of course I might be incorrect about stamp duty but it might be an issue worth exploring.

[Gengulphus]

It was my understanding that if property was gifted such a transaction would be subject to stamp duty ...

According to HMRC in https://www.gov.uk/guidance/stamp-duty- ... d-a-return :

"Some land and property transactions are exempt from SDLT. You don’t need to tell HMRC about these. They include:
•transactions where no money or other type of payment changes hands
•property left to you in a will
•property transferred because of divorce or dissolution of a civil partnership"

and:

"You can give property or land away or transfer ownership to another person. If there’s no ‘chargeable consideration’ you don’t have to pay SDLT or file a return. The chargeable consideration is a payment that can be cash or another type of payment, including:
•goods
•works or services
•release from a debt
•transfer of a debt, including the value of any outstanding mortgage"

I'd guess it's that last point that led to your understanding - a gift of a property with an outstanding mortgage on it either involves you paying off that mortgage first, or you transferring the mortgage to the recipient. The second case is equivalent (though it may be cheaper and/or more streamlined) to the recipient borrowing the amount of the mortgage, paying that amount to you for the property and you paying off your mortgage with it, and that's basically how stamp duty treats it. So stamp duty may be payable on a gifted property if responsibility for a mortgage goes along with it, calculated on the amount of the mortgage (so it will be zero if the amount of the mortgage, which is why I say "may be" rather than "is"), but not if it's a outright gift of the property with no mortgage attached.

Gengulphus

[DrBunsenHoneydew]

Just a quick side-note on the transfer of the IHT allowance between spouses:

In this thread the OP's father died in 1976, so the unused part of his IHT Nil Rate Band is transferrable to OP's widowed mother.

Readers should note however that if first death was before 1975 the full NRB may not be transferable as in that era the amount of tax-free "spouse exemption" was then limited, and that rule still applies to the new NRB IHT transferability.

[PinkDalek]

Just a quick side-note on the transfer of the IHT allowance between spouses:

In this thread the OP's father died in 1976, so the unused part of his IHT Nil Rate Band is transferrable to OP's widowed mother.

Readers should note however that if first death was before 1975 the full NRB may not be transferable as in that era the amount of tax-free "spouse exemption" was then limited, and that rule still applies to the new NRB IHT transferability.

That's a good point.

The Notes on page 4 go into more detail:

Claim to transfer unused nil rate band
Schedule IHT402
https://www.gov.uk/government/uploads/s ... IHT402.pdf

Extract only (I supplied the above link earlier to ensure the OP studied it):

Spouse exemption after 12 November 1974

After that date there is no limit to spouse exemption unless the deceased was domiciled in the UK and the surviving spouse was not domiciled in the UK, when it is limited to £55,000. ...