not a Will

Rio_3

Hello to everyone

is there anyone out there that can advise me on the subject of signing my house over to my family in a (Trust Fund) . I was talking with a friend in the USA last night and our conversation covered this , she has done it in the US but I would like to know if it can be done in this country.

therefore the inheritance tax would be avoided
Many Thanks
Rio

alyth

Rio, I'm not a lawyer but worked as a PA in this area of law. it can be done, but with changes to inheritance law (I left this field 6 months ago) this have been tightened up to avoid being putting their property into their kid's names to avoid paying care costs. Go and see a lawyer, it may cost a few hundred pounds but that's nothing compared to inheritance tax when you go! And i worked in Scots law which is totally different to English law, so my experience may not apply to you! Seriously though, stuff like that is worth spending the money on, you may begrudge it but a lawyer will make sure everything is watertight.

sammyhammy

Please see a solicitor. Whilst some form of transfer may work to save care home fees (and I say may because there are so many caveats to that sentence!) it will almost definitely not work for inheritance tax.

If you put your home in a trust and continue to live in it the Revenue deem this to be a 'reservation of benefit'. This means that the seven year rule does not apply and the property remains part of your estate. The same is true for a holiday home that you continue to use.

The exception is if you give the property away and pay a full market rent. If you can afford to do this then it is a way to save inheritance tax once you have survived for seven years.

BUT, if a trust owns your home you lose control of it and become vulnerable to the decisions of others, even with professional trustees. For this to work it must be a discretionary trust and this means other beneficiaries who can potentially benefit from the trust. I'm probably going into too much depth here.

So, yes see a lawyer, but if you do set up a trust it will cost more than a few hundred pounds.

Rio_3

many thanks to alyth and sammyhammy for their replies.
I will digest the information.

I have been told that I can set up a Trust fund for half the value of the property in my children's names but I am going to look into it all this week.
once again Thanks for your help
Rio

sammyhammy

That sounds like a will trust rather than a lifetime trust.

Under this scheme you need to be one half of a married couple (or in a civil partnership) who co-own the property. On the first death one half of the property passes into the trust for the children. However, to protect the surviving partner they can 'borrow' the other half of the property from the trust.

The survivor then has their own half of the property plus the borrowed half. When the survivor dies the borrowed half is owed to the trust and is therefore not taxed as part of the estate of the second partner.

This is called a nil rate band discretionary trust as it utilises the tax free part of the first partner's estate (currently £285,000, £300,000 from April). By doing this a couple can have £600,000 in assets before paying Inheritance Tax. Put another way, this saves £120,000 in tax that would be paid if all of the property was taxed when the first partner died.

This is done by will and usually costs several hundred pounds via solicitors
(£500 - £1000 depending on the firm and other work required). There may be some other related work to alter the way you own the property but this is usually included within the overall cost.

Cook_County

In the United States it is common planning in some States (eg California) to transfer assets to a living trust to avoid probate (not tax). These are not effective in the UK.

Rio_3

thanks again sammhammy & cook_county.

I am having trouble finding all of this as last night was the first time I have been into it. cannot really understand the system of finding the pages that I am looking for.
Rio.

RibenaBerry_2

I agree with sammyhammy. This is a really complex area and most of these schemes simply don't work. At worst, they can directly cost you money for no benefit. If you are serious about this, see a specialist lawyer.

Also, if you want to tax plan, there are often better things for 'normal' (i.e. not super-rich) people to do than try lifetime tax planning.

sammyhammy

RibenaBerry wrote:

Also, if you want to tax plan, there are often better things for 'normal' (i.e. not super-rich) people to do than try lifetime tax planning.

My Mum likes ski'ing = Spending the Kids Inheritance; if you ain't got it you can't be taxed on it!;)

RibenaBerry_2

That's the first time I've heard it called that. That's a great name for it!