second home held in trust.

Booradley_2

simpy
I assume your father also owns his own home. So could not claim exemption fron CGT as he is not selling/transferring his main residence. Not so my mother whose only property this is.

Socrates
She is on pension credit (low income) counciltax benefit (low income) attendance allowance (classifed with a disability)
Before the mortgage was paid up she had some housing benefit which has since ceased

zzzLazyDaisy
My memory is hazy but I think the advice we received at the time was focusing on the business of the state making one sell ones home to pay for care. It was something like
1) Mother must own the house for three years to qualify for the discount.
2) then get it transferred using this trust deed
because
3) After she has unowned it for 7 years the state accept that she has no asset to sell. I think the seven year thing was to prevent people selling or gifting their home when residential care was imminent or on the horizon

I'm sure that (3) was on the minds of the mortgage consultant from the BS and solicitor who drew up the deal.

I can't be the only one who's done this given the amount of council housing that was being sold. Anyone in the same boat?

Boo

Booradley_2

New thought

Maybe the trust deed is enough to stop the state from making her sell the house in case of care costs.

Just to repeat. Mother is fit and well at 84 and is not in need of residential care.

Boo

GDB2222

Booradley wrote: »

The Relevant part of the Deed says:

Now this deed witnesseth that M* (mum) holds the said property for an estate in fee simple Upon Trust for K* (me) in equity and upon the expiration of three years from the date hereof M* will at the request and cost of K*execute such transfer as K* may request

Boo

We are getting somewhere!

What this deed says is that you already own the property, and so there is no question of inheritance tax on your mother's death. You should take legal advice on this, but I think it would be sensible to get the property transferred into your name pretty soon, whilst your mother is still in good health and able to deal with these things.

Does the deed specifically allow your mother to live in the property rent free? If so, she would have a life interest, which could mean that inheritance tax is a problem after all. However, as you have not mentioned any such clause in the trust deed, I assume that your mother simply lives there free of charge with your agreement.

Turning to capital gains tax, I think you will find that you are liable to pay capital gains tax when you dispose of the property on the difference between what you paid all those years ago and the sale proceeds. Depending on when the purchase took place, it is just possible that you would be eligible for dependent relatives relief, but I would not count on it.

The reason that the trust deed was executed is to do with the 60% discount your mother received. Although she was entitled to the 60% discount, she had to repay this if she sold or otherwise disposed of the property within three years. In practice, you paid for the property and you bought it on her behalf from the council, but she had to retain it in her name for three years, Hence, to protect your interests, the trust deed was executed.

I am reading between the lines here and making lots of guesses, so you will need to check all this out with your adviser.

socrates

I know what I would do when I transfer the property.....

Booradley_2

Socrates. You are a great help. There is nothing in the trust deed about mother living there rent free, thats just our understanding. The only other relevant clause I think is

"All payments to the * building society under the said legal charge are to be made by K* and in consequence of such M is to hold the said property upon trust for K* in equity as M* hearby acknowledges."

If I ever decide to sell it in the future can I live in it for a while then sell it as my principle private residence without incurring CGT liability, citing my other home which would never be sold as a second home.

... I'm intrigued Soc. What would you do after transfer
Boo

GDB2222

if you live in it for a while as your principal private residence, the capital gain gets apportioned according to time.

GDB2222

oh, and I think that Socrates would boot Mum out of the property and sell it

socrates

GDB2222 wrote: »

oh, and I think that Socrates would boot Mum out of the property and sell it

Absolutely not - but whatever.....

Booradley_2

CGT

1) Difference between value at first ownership and at selling = profit. Yes?
2) CGT due on profit? Rate?
3) Less alowances ?

Boo

localhero

Hi Booradley,

The 7 year rule applies to inheritance tax, rather than liability to care fees, of which transactions can be assessed without limit of time.

Legally, you have a beneficial interest in the property which is subject to CGT from when you became the beneficial owner of it to when you dispose of it, subject to the various reliefs and allowances.

On the plus side, if your mother required long term care, the property would have to be disregarded from any means test.

For inheritance tax purposes the property won't form part of your mother's estate, as it will already form part of your estate.

Your solicitor should have explained all this to you at the time.

In fact your situation is almost identical to the OP of this thread:

http://forums.moneysavingexpert.com/showthread.html?t=1589137&highlight=