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bigduckontax, Accountant
Category: Tax
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A relative has left a property in trust, with a named person

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A relative has left a property in trust, with a named person having the right to reside in it (subject to their maintaining the property in as good a state of repair as at my relatives death & their insuring it in the trustees name) until their death or their agreeing to the property being sold, at which time the property will pass to me. Will I have any inheritance tax to pay or capital gains tax? What obligations do the trustees have to ensure that the value is preserved and do I have the right to see all of the conditions of the trust arrangements?
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Any Inheritance Tax (IHT) due is a matter for the Executors of your relative's estate and/or the Trustees if they differ. IHT is paid from the estate's assets. It is always possible that in the long term the property may have to be sold by the Trustees to keep the trust going until the named person passes or relinquishes their rights voluntarily eg by moving out to enter a retirement home. Beneficiaries have some control over Trustees, but only where the trust is being improperly administered. Application may be made to the Court to have Trustees removed or replaced. I do hope that my reply has been of assistance.
The Trust Deed may grant or restrict Trustees powers.
In general terms Trustees must:
Secure the Trust property
Keep records of decisions and actions
Not use the trust to benefit themselves
Delegate their powers
Get proper advice before exercising powers
Customer: replied 2 years ago.
Thank you for your messages.I don't understand how the property could be sold to keep the trust going if the sole purpose of the trust is to hold the ownership of the property whilst the named person wishes to live in it or relinquishes their right to do so. At that point, I believe either I take possession of the property or it is sold with the proceeds coming to me or my children. It's not clear whether the beneficial occupier can choose to relinquish their right and pass the property to me without it being sold. Do I have the right to ask for clarification on what provision there is should the beneficial occupier become incapacitated and be unable to maintain the property and therefore be in breach of the terms of their right to occupy?Assuming IHT is paid from the estate upon transfer into the trust, would I have either capital gains tax liability or further IHT to pay if I got possession of the property in, say 20 years time? Or if the property was sold at that time with the proceeds coming to me - bearing in mind that the value then may be considerably higher than at today's valuation? I am really quite worried about all of this and whether I should be looking to get further legal advice.
I merely mentioned it because sometimes this has to happen in cases where the income from the property in trust is inadequate to meet the beneficiaries needs. You would take possession on relinquishment as you surmise. You must peruse the trust deed as to the position should the beneficiary be unable to act in accordance with its provisions. In the event of a sale by Trustees the Trust would be liable to any Capital Gains Tax due on the gain from the probate value. This would be taxed at 28%. I think that you would be well advised to seek trusted, professional advice on your position. Trusts and their administration can be exceedingly complex. Remember the old adage of two advocates walking down the Royal Mile discussing a case one saying to the other that there was a great danger of the trust's funds being frittered away amongst the beneficiaries! Please be so kind as to rate me before you leave the Just Answer site.
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Customer: replied 2 years ago.
Thank you Keith. You have clarified the position regarding inheritance and capital gains tax. I will request further details from the trustee at a suitable time and hope that this whole situation works out as I believe it was intended, for the beneficial occupant and in due course for either me or my children. With regards
One hopes that all will go well. Thank you for your support.