LIfe interest trust v's discretionary trust

Always_the_realist

Hope I'm posting this in the correct place. To start with I am a 50 something single mother. I gave up my 9 to 5 job three years ago to go into property development with a partner. We have project managed (and done a lot of the work - very hands on) 9 new builds. I am living in the last property and waiting for it to sell. The long and short is it's now very much a business partnership that has gone sour over the years (ltd company) and one that I want to finish with as soon as possible. That's a bit of background - I'm not completely inexperienced with the building trade. My thoughts now are to renovate property (which I have also done before) and also to help out my daughter. I've looked into buying her a house using a trust fund. I've looked into both discretionary and lifetime trust funds. I understand that with a discretionary trust fund the extra stamp duty will have to be paid but not with a LI fund. But with a discretionary TF I would be more in control if we were to sell the property and she would have a right to stay with a LI fund. My thoughts are that we buy a property to renovate, She lives there whilst she saves for her own place. We sell, we share any profit. Are there any pitfalls with this? Will this exempt her from a lifetime ISA when she buys her own property? Is there a length of time she will have to live in the property before it can be sold. Thanks in advance

AnotherJoe

I'm confused by your statements about buying your daughter a house.
Because you start off with that and then it softens to its just a place for her to live, she does some work on it with you, and she shares any profits you make. In other words the situation you are currently exiting from, your current property dev business.


You can do many things.
-You can buy her a house.
-You can create a trust and she lives in a house (but its not hers)
-She can enter the property development business with you.
-She could be an employee of your PD business.


I suggest though, that you cannot combine all of them

Wildsound

Not 100% sure why trusts need to be involved at all without more information?

Someone more qualified on trusts, feel free to come along and discount my comment - Why not just create a discretionary trust fund (her as the beneficiary), put money in and then she takes the money out via a 'loan deed'. She can then use the money to buy the house. She would essentially be in debt to the trust meaning that the amount is protected from future divorce settlements, IHT etc... It would also allow things like Lifetime ISAs to be involved as no property is being purchased on her behalf beforehand. However, if this is to be done within the 12 months (Lifetime ISA terms and conditions, I suggest you make yourself clear on them) then I wouldn't let the extra up to £2,000 (either side of a tax year) government bonus force a 'tail wagging the dog' scenario.

Always_the_realist

I'm not trying to exit the property development business - I want to exit any connection with my business partner. I'm quite happy in that line of work. I was thinking of a way for me to add to my retirement pot and for my daughter to earn a deposit for her own house. The background info was so no one tried to tell me how hard renovating properties is with no experience. Whilst researching buying a property for your child I came across the trust funds.

xylophone

Your daughter is an adult and earning?

Are you in a position to gift her a deposit?

AnotherJoe

Always_the_realist wrote: »

I'm not trying to exit the property development business - I want to exit any connection with my business partner. I'm quite happy in that line of work. I was thinking of a way for me to add to my retirement pot and for my daughter to earn a deposit for her own house. The background info was so no one tried to tell me how hard renovating properties is with no experience. Whilst researching buying a property for your child I came across the trust funds.

Fair enough but you started off with "I've looked into buying her a house" which is a wholly different proposition to helping her earn enough so she can save for a deposit. Two different things.

And then you are ambivalent as to whether you'd enter a property development business with her as a partner, or just if she's be working almost as an employees, and I'm not sure what trust funds have got to do with anything.

Not trying to be awkward, just pointing out that your aims are not clear from what you posted.

Always_the_realist

It's my (limited) understanding that if the property is in trust no capital gains tax is payable on a sale. No stamp duty is payable if it's bought via a lifetime trust. All I'm asking is if anyone has more knowledge than me regarding the questions I asked. Not about any 'business' partnership with my daughter.

kidmugsy

Always_the_realist wrote: »

It's my (limited) understanding that if the property is in trust no capital gains tax is payable on a sale.

As a general statement that's wrong. Discretionary trusts are subject to CGT. Maybe you mean that if a beneficiary is living in the property as her principal private residence then there may be no CGT to pay. That sounds right: what does your solicitor say?