Property trust CGT allowance

downshifter98

Mum and Dad owned their house as tenants in common split 50% each. Mum died and left her half in trust (until Dad no longer needs it). The trust has 2 trustees and 4 eventual beneficiaries (2 of which are the trustees). I understand that any cgt is set at 28% (for a trust) but is the cgt allowance (£5500) per trust, per trustee or per beneficiary. Apologies if this is a stupid question!

Many thanks in advance.

getmore4less

per trust,

check the life interest relief

xylophone

http://www.greenwoods.co.uk/knowledge-base/private-client/life-interest-trusts/

"If the life tenant lives in the trust property as their principal private residence and that property is sold, it is not subject to capital gains tax."

Is the above relevant to your case?

downshifter98

Thanks - I will have a look at the link.

downshifter98

Mum's will basically states that her half of the house is to be put into trust (with my brother and I as trustees) but that we are not allowed to benefit in anyway whilst Dad still has an interest or until he renounces his interest in writing (obviously unlikely). Mum's half only actually passes to the 4 beneficiaries upon Dad's death or when he gives up residence (presumably to move into a care home?). I need to find out if this is essentially a 'life interest trust' - fingers crossed, it is.

downshifter98

OK I'm learning all the time; it appears that Mum's trust is indeed a 'life interest' type which does mean that the property will avoid CGT (as it's still Dad's main residence) but it will be liable for inheritance tax on the full value of the house (over £325t) as a 'life interest' trust means Mum's inheritance tax allowance cannot be utilised on whatever is in the trust.

Its all pretty academic really as Dad is in fine health but all good to know for the future.

Thanks for pointing me in right direction!

xylophone

it will be liable for inheritance tax on the full value of the house (over £325t) as a 'life interest' trust means Mum's inheritance tax allowance cannot be utilised on whatever is in the trust.

Are you sure of this? According to the link

"If by your Will and it is an immediate post-death trust:

The spouse exemption is available if the life tenant is the surviving spouse; there is no tax to pay when established. Otherwise inheritance tax is paid within the estate"

Best to check with your solicitor or HMRC- https://www.gov.uk/government/organisations/hm-revenue-customs/contact/trusts

downshifter98

xylophone wrote: »

Are you sure of this? According to the link

"If by your Will and it is an immediate post-death trust:

The spouse exemption is available if the life tenant is the surviving spouse; there is no tax to pay when established. Otherwise inheritance tax is paid within the estate"

Best to check with your solicitor or HMRC- https://www.gov.uk/government/organisations/hm-revenue-customs/contact/trusts

Where would I be without these forums - I agree; the overall estate is treated as if Mum just left her assets to Dad and therefore Mums nil rate band will be available to put against Dads total estate (ie the full property value). My head hurts buts it's been a good learning curve.