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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 9683
Experience:  I have been practising for 30 years.
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A discretionary trust was each established by my late mother

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A discretionary trust was each established by my late mother & father in 2006, with my father passing away in 2011 & my mom in 2015. I am a trustee of both trusts & wanted to know whether there was any tax to be paid on any capital disbursements. Both parents were under the inheritance tax threshold at the time of probate being granted & no tax was paid. The trusts each hold 50% of the house deeds & my moms trust the balance of the liquid assets . No revenue has been generated by these trusts to date
Submitted: 1 year ago.
Category: Law
Customer: replied 1 year ago.
The trusts were established prior to the legislation governing discretionary trusts being amended in 2007?
Each spouse donated 1/3 of their 1/2 share in the house ie 1/6 at the time of the trusts establishment with the balance of each share (2/6) passing to the trust upon their death. The capital I want to distribute is the liquid assets which are to be shared 50/50 with my brother . There is no intention to dispose of the house as my brother (who has tenancy rights) lives there.
Expert:  Nicola-mod replied 1 year ago.
Hello,
I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Nicola
Customer: replied 1 year ago.
Hi Nicola, please continue to research my question.
Regards
Ian
Expert:  Nicola-mod replied 1 year ago.
Hello,
We will continue to look for a Professional to assist you.
Thank you for your patience,
Nicola
Expert:  F E Smith replied 1 year ago.
There is potentially tax to pay on income received by the trust. The government have a website which may help. https://www.gov.uk/trusts-taxes/trusts-and-income-taxThere is no tax to pay on distribution of capital itself. So, if there was say £200,000 in this trust at the date of death and the trust had never received any interest, and any money that was now being distributed was simply being taken out of the £200,000, there is no tax.If the house is being used as a prime residence, and the property is subsequently sold at a price which was higher than the value at the date of death, there is no capital gains tax to pay on the share of the person who lives there but there is capital gains tax to pay on the share of the person who does not live there.Can I clarify anything for you?
F E Smith, Advocate
Category: Law
Satisfied Customers: 9683
Experience: I have been practising for 30 years.
F E Smith and 3 other Law Specialists are ready to help you
Customer: replied 1 year ago.
I have researched the info on the Govt website link provided & raise the possibility of an Inheritance tax 'exit charge' from a trust of 6% . Would I have to pay this tax on the asset (money) if it were to be distributed to me (beneficiary) . The liquid assets were all transferred into the Trust i.t.o. moms Will along with the balance of the fixed property (2/6) . The site lists where there are exclusions to this 'exit charge' but I don't think I qualify? Your opinion on this would be much appreciated.
Kind Regards
Ian
Customer: replied 1 year ago.
There was no inheritance tax payable on the transfer into the trust (i.t.o. the will) as the assets fell below the 325k threshold