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Helen Hill
Helen Hill, Lawyer
Category: Family Law
Satisfied Customers: 186
Experience:  LLB Law, Licensed Conveyancer and Probate Practitioner, Fellow of CILEx, Trust and Estates Practitioner (STEP)
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I am 67 years of age. Assistant: Where are you? It matters

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I am 67 years of age.
Assistant: Where are you? It matters because laws vary by location.
Customer: I live near Cirencester, England. I am looking for advice on Inheritance Tax.
Assistant: What steps have you taken so far?
Customer: A few, but wanted to know if i could put my home, but which is rented out into a trust for my two middle aged children, so that theu would not be liable to IHT on the property when i died.
Assistant: Anything else you want the lawyer to know before I connect you?
Customer: Not for the moment

Thank you for your question. My name is ***** ***** I will be able to help you with this.

It is entirely possible to transfer a property into trust for your two children now however the tax consequences depend on a number of different factors.

Firstly, to avoid an immediate charge to IHT the property value must be below £325,000 and you must not have made any previous transfers into trust within the last seven years. Please also be aware that a transfer into trust is a disposal for capital gains tax purposes however you could elect to 'hold over' any gain so it won't have to be paid until the property is ultimately disposed of. Note that if you continued to own your property until your death then capital gains tax would not be payable.

The second important point regarding inheritance tax is that you cannot be a beneficiary of the trust into which you transfer the property. This means that you cannot continue to receive the rent which must be paid to the trustees or assigned to the beneficiaries. The trust rate of income tax is much higher than the standard personal rate so the latter option might be better depending on the beneficiaries circumstances.

As long as you do not retain any benefit in the property it will be outside of your estate for IHT purposes as long as you survive for seven years from the date of the transfer.

This is quite a complex area of estate planning so I would recommend that, if you decide to go ahead, you look for a specialist adviser to assist. I can highly recommend any member of STEP (the Society for Trust and Estate Practitioners) as they will all be suitably qualified in this area of law.

I hope this information is helpful. Please let me know if you have any further questions.

Best regards, Helen

Customer: replied 1 month ago.
Thank you. The property is worth circa £250,000 the rent i receive which i pay the tax on, i am a basic rate tax payer, i give to my partner whom i live with in her house. I have not made any other transfers to my children.
I think i see a problem, because i would be a beneficiary under the present arrangement.
If i changed it so the rent went direct to my partner, and she paid tax on the rent received, rather than i, would this work ?

Thank you for the additional information.

You could make your partner a beneficiary under the terms of the trust and the income could be assigned to her. She would then declare the income on her own tax returns and only pay her personal rate of income tax, the way that you do now. The trustees can still be directed to pass the property to your children ultimately.

As long as you weren't a beneficiary this would be effective for IHT planning as above.

Do you have significant other assets which would mean that your estate would be liable to IHT? I ask because you mention that you live in your partner's house rather than owning another property.

Customer: replied 1 month ago.
Thank you.
I have financial investments of circa £350,000, managed by a professional wealth fund.
I do have a Prudential Investment Plan of circa £80,000, this will pay me from next year 4%, and the capital left will go to my children on my death Tax free.
As you say it is complex, also i am concerned that if my relationship fails, it feels as if i could be in a very difficult position.
If the trust was a discretionary trust, and you and your children are trustees, you can chose to stop the payments of income to her at any time. You could also write a clear letter of wishes that she is not to benefit from the capital but to receive income payments, at the trustees discretion, for as long as you are in a relationship.
You should definitely ensure you find someone who understands your requirements and can ensure the trust suits your needs.
Helen Hill and other Family Law Specialists are ready to help you
Customer: replied 1 month ago.
Helen.
Thank you for your help and advise on this. If i decide to continue, i will get in touch with STEP.
Kind regardsJames

Thank you for your kind rating, it is much appreciated.