Transferring Share Ownership

Anthony71

I'm the sole beneficiary of a trust set up by my father who is now deceased.

The trust holds shares worth £130,000 which I'm due to receive on my next birthday, when the trust will be wound up.

I know nothing of these matters and would very much appreciate some advice.

Do the shares have to be sold by the trust and the proceeds given to me or can the ownership of the shares be transferred from the trust to me so that I can sell them over time as I need to?

If such a transfer of ownership was made would the shares count as income, capital, or neither?

And how would such a transfer be effected?

Would I need to involve a solicitor, accountant or stockbroker in order to own and sell shares or can the trust simply make them over to my name?

I'm assuming that taking ownership of the shares would be more sensible than having the trust sell them all and being liable for capital gains tax on the proceeds?

Many thanks for any advice.

xylophone

Who are the Trustees of the Trust? They can contact HMRC and /or seek professional assistance.

https://www.gov.uk/trusts-taxes/where-to-get-help

Mattygroves2

Yes the shares can be transferred to you as shares rather than cash. You would have the same base cost for CGT as the Trust but could stagger sales over a few tax years to use several years CGT allowances.

When the Trust is dissolved a deed will be drawn up by the Trustees ( or at least signed by them) and this will specify how the assets of the Trust are distributed including specifying the shares to be transferred if that is the case.

Whether it is worth transferring as shares rather than cash comes down to the CGT position of the Trust. Would the Trustees have thought of this ?

In terms of the mechanics I'm sure they could be transferred to you in the form of share certificates but it would be easier if you set up an account with (probably) an online broker. You'll then need to fill out transfer forms and get the Trustees to sort out the broker their end. I suspect it might mean a few phone calls as what you would be doing isn't the usual.

The distribution of shares (or cash) from the Trust when it is broken are capital distributions but any income you get from the shares after the transfer would be taxed on you. You might want to think about bed and ISA your allowance each year to make more of the income tax free in the future.

Anthony71

Many thanks for the replies.

xylophone wrote: »

Who are the Trustees of the Trust?

The trustees are relatives - retirees living abroad soaked in sangria and less than enthusiastic about trust business (and who can blame them for that?).

Mattygroves2 wrote: »

Yes the shares can be transferred to you as shares rather than cash. You would have the same base cost for CGT as the Trust but could stagger sales over a few tax years to use several years CGT allowances.

So does the CGT depend on the difference between the value of the shares when they were purchased in 2008 and their value today?

If so, I suppose that may not be all that great given that the value of the trust is the same today as it was in 2008 (although I've received monthly interest since then as well).

Whether it is worth transferring as shares rather than cash comes down to the CGT position of the Trust. Would the Trustees have thought of this ?

Unlikely.

In terms of the mechanics I'm sure they could be transferred to you in the form of share certificates but it would be easier if you set up an account with (probably) an online broker. You'll then need to fill out transfer forms and get the Trustees to sort out the broker their end. I suspect it might mean a few phone calls as what you would be doing isn't the usual.

I don't really know what I'm doing and if it's "unusual" it's probably a bad idea.

I think I'll just ask the trust to liquidate all the assets (they've written asking me what I want done with the shares).

Do you have any idea how long this is likely to take?

redux

Things may depend on what type of trust it is.

One scheme is called a loan trust. This means the person makes a loan to the trust, then the capital growth goes to the trust beneficiaries when the trust is wound up. The originating person may claim back the loan, or they may have waived return of part or all of the loan.

Another is a discounted gift trust, where the gift is made to the trust, and will ultimately go to the beneficiaries, while the income can still come to the person setting up the trust.

There are probably other types of trust where my knowledge is even sketchier than this, but similar considerations may apply, or may not.

In the case of a waived loan return on the first type, or anyway on the second type, if the person survived less than 7 years from setting up the trust, there may be some inheritance tax arising (on a tapering basis in the 7 years) if the sum of the estate is larger than the nil rate tax band.

On the other hand, if your mother is still alive, it's possible that most of the estate is going to her, so there is unlikely to be any inheritance tax arising immediately, and the residue of his nil rate tax band will be added to hers later.

As for the starting valuations for later capital gains tax purposes, if you keep the investments, I can't quite see why the value would be imported as from the original acquisition date, as some of these trust arrangements will have contained exemptions for some tax purposes. My guess would be value the assets as of now, but that really is a guess.

Professional advice needed, from accountant and/or estate planning lawyer. Maybe you can get advice on some of this from the solicitor appointed by the executors, who may well also have had something to do with setting up the trust.

Apologies if it turns out I'm waffling and none of this is relevant.

Mattygroves2

Anthony71 wrote: »

Many thanks for the replies.



The trustees are relatives - retirees living abroad soaked in sangria and less than enthusiastic about trust business (and who can blame them for that?).



So does the CGT depend on the difference between the value of the shares when they were purchased in 2008 and their value today?

the gain is calculated as the difference between sales proceeds and the original cost. This applies whether they are sold within the Trust or transferred to you.

If so, I suppose that may not be all that great given that the value of the trust is the same today as it was in 2008 (although I've received monthly interest since then as well).

Have you been receiving tax vouchers and reclaiming the tax paid ?



Unlikely.

Then ask them what the position is.



I don't really know what I'm doing and if it's "unusual" it's probably a bad idea.

I think I'll just ask the trust to liquidate all the assets (they've written asking me what I want done with the shares).

Check the CGT position first as you could be throwing money away. It can be done but will take a bit of effort.

Do you have any idea how long this is likely to take?

A couple of days from the Trustees giving their instructions but the Deed may take longer as they are usually drawn up by solicitors.

Hopefully answers above in red. It isn't a difficult process but would take some effort on your part. Given the sum of money involved you will need to learn about investments soon so you might as well start now.

My OH went through this process last year to save CGT on his parents two Trusts. It was easier for us as all three people who got shares rather than cash already had accounts with brokers who sorted the actual mechanics if the transfer out. Shares all now sold with zero CGT payable so more cash for everyone.

Mattygroves2

redux wrote: »

Things may depend on what type of trust it is.

One scheme is called a loan trust. This means the person makes a loan to the trust, then the capital growth goes to the trust beneficiaries when the trust is wound up. The originating person may claim back the loan, or they may have waived return of part or all of the loan.

Another is a discounted gift trust, where the gift is made to the trust, and will ultimately go to the beneficiaries, while the income can still come to the person setting up the trust.

There are probably other types of trust where my knowledge is even sketchier than this, but similar considerations may apply, or may not.

In the case of a waived loan return on the first type, or anyway on the second type, if the person survived less than 7 years from setting up the trust, there may be some inheritance tax arising (on a tapering basis in the 7 years) if the sum of the estate is larger than the nil rate tax band.

On the other hand, if your mother is still alive, it's possible that most of the estate is going to her, so there is unlikely to be any inheritance tax arising immediately, and the residue of his nil rate tax band will be added to hers later.

Nothing to suggest this us anything other than a Trust with one beneficiary -the OP.

As for the starting valuations for later capital gains tax purposes, if you keep the investments, I can't quite see why the value would be imported as from the original acquisition date, as some of these trust arrangements will have contained exemptions for some tax purposes. My guess would be value the assets as of now, but that really is a guess.

[COLOR="rgb(255, 140, 0)"]Definitely the original purchase cost for CGT purposes. Did it last year and just submitted tax returns after selling the shares personally to save the CGT that would hVe been payable if they had been sold whilst still in Trust.[/COLOR]

Professional advice needed, from accountant and/or estate planning lawyer. Maybe you can get advice on some of this from the solicitor appointed by the executors, who may well also have had something to do with setting up the trust.

[COLOR="rgb(255, 140, 0)"]Not a bad suggestion but will cost money. A solicitor will probably be needed by the Trustees but one of them may be one or a retired one.[/COLOR]

Apologies if it turns out I'm waffling and none of this is relevant.

Some clarifications above based on the know,edge gained from breaking two Discretionary Trusts and transferring the shares out to do what the OP is thinking about but in our case they went to four people to split the gain enough to allow them to be sold in one year (if required).

redux

I think that just confirms there are far more types of trust than I know about. I slightly described those I have a little knowledge of recently, but as before, this may well not be relevant.

As you say, the OP seems to be the sole beneficiary, whereas those I mentioned seem to split or reserve assets or income a bit.

I'd still be a bit surprised though if a vehicle possibly set up for mitigating future inheritance tax would run into potential capital gains tax issues instead.