Is there any advantage to putting a house

March2012

in trust for your child? and how does it work exactly. i thought it woudl be good for them whn they are older.

SeniorSam

If you were to put your residence in Trust for your children, you would be making a gift. If you remain living at the property, then the value of the gift still remains with you, so you will not have removed the value from your estate when you die.

To avoid that retained ownership, you would need to pay a full market rent to the Trust, who would in turn have to submit annual tax returns and pay tax on the income.

If your home is jointly owned, it may be better to change the ownership to Tenants in Common. That way, you and your wife would own half each.

As you can see, gifts are not as clear cut as you may have thought. In addition, as the property may have been gifted to avoid long term care, that would also not be acceptable.

There are ways to considerably reduce IHT if that is what you intended.

Hope this helps

Sam

PS. Be aware that if Trusts have an 'income' producing asset, the Trust will be taxed. There are many assets that are NOT 'income producing' and therefore the Trust does not need to make tax returns. Specialist advice should always be sought from someone who has a full knowledge of Trusts and taxation. Be careful.

Sam

xylophone

http://www.nidirect.gov.uk/index/information-and-services/money-tax-and-benefits/taxes/trusts/types-of-trust-and-tax-implications/parental-trusts-for-children.htm

If you are setting up a parental trust for minor children there are other tax implications- see above.

grey_gym_sock

it will be good for your child if they will be able to kick you out and keep the house for themselves. but not so good for you.

assuming it's the house you live in. generally, owning the house you live is tax-efficient. if you have assets to give away, it's probably better to start with something else.

SeniorSam

grey_gym_sock wrote: »

it will be good for your child if they will be able to kick you out and keep the house for themselves. but not so good for you.

assuming it's the house you live in. generally, owning the house you live is tax-efficient. if you have assets to give away, it's probably better to start with something else.

Your children could not kick you out. When setting up a Trust, you would remain as Trustees and as such, maintain control with other trustees so that any changes need to be agreed by all trustees.

Sam

holly_hobby

Importantly, if (whilst) its mortgaged you can not place the property into trust.

So the q may be alittle academic at the moment if thats the case.

Indeed what is the purpose of the exercise, is it because you know your estate will be exposed to IHT liability upon death ?

Hope this helps

Holly

troubleinparadise

I guess if you are financially secure enough to do so, then that might be a tax saving exercise, if looking at IHT as the issue.

But that is also presuming that you won't be relying on the sale of the house to perhaps fund downsizing to a smaller property in the future, or fund your later years post paid employment.

grey_gym_sock

OP needs to explain what they are trying to do.

1) genuinely give assets to children

2) cunning tax fiddle, without really giving assets away

3) both the above, i.e. give assets to children in tax-efficient manner

troubleinparadise

grey_gym_sock wrote: »

OP needs to explain what they are trying to do.

1) genuinely give assets to children

2) cunning tax fiddle, without really giving assets away

3) both the above, i.e. give assets to children in tax-efficient manner

Or the other often asked query, how to ensure a house doesn't get used to pay for care home fees...

xylophone

What about buying a new rental property for your children with a private mortgage off the seller but putting it into a trust that you manage until they are old enough?

This would still be a parental trust for a minor child- see post 3 above