CGT Implications on a House with a Declaration of Trust in Place

AET9

In 1990 my in-laws (Mr & Mrs T) applied to buy their Council house and my husband and I (A & E) put up the deposit and paid the mortgage for them. We drew up a Declaration of Trust between both parties stating that Mr & Mrs T could remain at the property for as long as they wanted, A & E could not ask them to leave. It also stated that should Mr & Mrs T wish to move then this property was to be sold or transferred to A & E and a substitute property purchased at the expense of A & E. The mortgage has been paid up long ago and the Title Deeds are in the names of A & E. Mrs T passed away in 1994, Mr T (aged 96) is still living in the property rent free. A & E are now retiring and selling up their main residence to move 100 miles away and Mr T would like to move to the same area. If we were to purchase a sole property for Mr T then this would be in line with the Declaration of Trust but our dilemma is if we pool the two properties and purchase one house with an annexe or a granny flat where do we stand CGT wise over either option? I have heard of something called 'Dependent Relative Relief' but think we are a couple of years too late to claim under this.

I would very much appreciate any advice on this issue.

Guest101

I believe CGT would be paid, it is not your primary residence.


Also acutely aware that you might've benefitted from a discount you weren't entitled to.

Pixie5740

I'm confused. If A&E own the property and are named on the deeds what exactly would Mr & Mrs T be selling or transferring to A&E if Mr & Mrs T moved?

I thought a Declaration of Trust was drawn up when 2 or more people purchased a property together and are going to own it either as tenants in common or joint tenants but in this case it sounds as though only A&E were the owners and not Mr & Mrs T as well.

Since A&E own the property Mr T lives in then when it is sold, A&E could have Capital Gains Tax to pay depending on any increase in value of the property since it was bought, other capital gains this tax year and any capital gains allowances available.

AET9

Sorry if not clear, Mr & Mrs T got the original Mortgage and paid the instalments. The Declaration of Trust was to safeguard Mr & Mrs T continued ability to live in the property.

Guest101

AET9 wrote: »

Sorry if not clear, Mr & Mrs T got the original Mortgage and paid the instalments. The Declaration of Trust was to safeguard Mr & Mrs T continued ability to live in the property.

You mean after they transferred to A&E?


It is slightly confusing. But basically A&E own the property, don't live there, so it's going to be CGT'ed.

Pixie5740

I thought A&E put down the deposit and paid the mortgage? Now it's Mr & Mrs T that had the mortgage and made the payments? :huh:

Was the mortgage just in Mr & Mrs T's names because they were the ones with the Right to Buy but couldn't afford to exercise their Right to Buy so A & E gave Mr & Mrs T the deposit and then paid the mortgage (which is in Mr & Mrs T's name) in order to take advantage of the whopping big discount or am I still confused as to what is going on because the property would then be in Mr & Mrs T's name and the Declaration of Trust would mean diddly squat because A&E couldn't sell a property that didn't belong to them?

Guest101

Pixie5740 wrote: »

I thought A&E put down the deposit and paid the mortgage? Now it's Mr & Mrs T that had the mortgage and made the payments? :huh:

Was the mortgage just in Mr & Mrs T's names because they were the ones with the Right to Buy but couldn't afford to exercise their Right to Buy so A & E gave Mr & Mrs T the deposit and then paid the mortgage (which is in Mr & Mrs T's name) in order to take advantage of the whopping big discount or am I still confused as to what is going on?

I 'think' you've hit the nail on the head there


the T's had a RTB with a discount.


A&E wanted to make some money so put down the deposit and paid the mortgage.


Once paid of the T's transferred to A&E, but with a living arrangement agreement.


Which to me sounds like taking advantage of the system, but I could be wrong

AET9

So the fact that Mr T has resided in the property for 25 years rent free and continues to and maintaining said property to a good standard is taking advantage of the system. I dare say if all that were added up it would come to more than the discount given at the time and some.

Very cynical posters who obviously don't have anything better to do with their time judging by how many posts they have to their names. If you can't be helpful it's best to say nothing especially when not knowing all the facts.

danslenoir

AET9 wrote: »

So the fact that Mr T has resided in the property for 25 years rent free and continues to and maintaining said property to a good standard is taking advantage of the system. I dare say if all that were added up it would come to more than the discount given at the time and some.

Very cynical posters who obviously don't have anything better to do with their time judging by how many posts they have to their names. If you can't be helpful it's best to say nothing especially when not knowing all the facts.

Would you care to share the relevant facts, because something does smell fishy...

It's one thing gifting your parents money to enable them to purchase and own their council home, but why does this necessitate them signing away the deeds to you? Signing away the deeds means that your generosity was not a gift, but an investment that you have gotten something in return from. That something being an asset sold at a discounted price you shouldn't have been entitled to.

ognum

AET9 wrote: »

In 1990 my in-laws (Mr & Mrs T) applied to buy their Council house and my husband and I (A & E) put up the deposit and paid the mortgage for them. We drew up a Declaration of Trust between both parties stating that Mr & Mrs T could remain at the property for as long as they wanted, A & E could not ask them to leave. It also stated that should Mr & Mrs T wish to move then this property was to be sold or transferred to A & E and a substitute property purchased at the expense of A & E. The mortgage has been paid up long ago and the Title Deeds are in the names of A & E. Mrs T passed away in 1994, Mr T (aged 96) is still living in the property rent free. A & E are now retiring and selling up their main residence to move 100 miles away and Mr T would like to move to the same area. If we were to purchase a sole property for Mr T then this would be in line with the Declaration of Trust but our dilemma is if we pool the two properties and purchase one house with an annexe or a granny flat where do we stand CGT wise over either option? I have heard of something called 'Dependent Relative Relief' but think we are a couple of years too late to claim under this.

I would very much appreciate any advice on this issue.

Quoted before the question is deleted as so many on this subject are.

Please can you confirm, who owns the propert and for how long, who originally bought the property.

Are you simply concerned about capital gains tax?

ognum

AET9 wrote: »

So the fact that Mr T has resided in the property for 25 years rent free and continues to and maintaining said property to a good standard is taking advantage of the system. I dare say if all that were added up it would come to more than the discount given at the time and some.

Very cynical posters who obviously don't have anything better to do with their time judging by how many posts they have to their names. If you can't be helpful it's best to say nothing especially when not knowing all the facts.

Or maybe the posters are people who like to help but don't like people who manipulate the system for their own benefit and prevent others from having social housing because of this!