Benefiting from a trust during their lifetime

SuttonMark

In 1991 three family members helped the mother in law buy a small seaside flat. We provided all the funding. In consideration it was agreed that the MIL would hold the property in trust for the three of us. A solicitor arranged a simple deed to recognise this. There was no mention within the deed about the right to live in the property for her lifetime. The deeds were registered in the MIL's name. Sadly she has now passed away. I am the executor. I have two questions that I would like help on:
1) The HMRC Estate Report asks whether the MIL benefitted from, or had the right to benefit from a trust in their lifetime? This goes on to ask if she had the right to live in a house that was held in trust during their lifetime? Should I say yes to either/both of these questions?
2) My understanding is that the three of us will have a substantial CGT liability if the flat is sold. However as we bought the flat with the sole intention of providing the MIL with a home would it be possible to argue the case with HMRC that she did have an interest in possession of the flat?
Many thanks.

Marcon

SuttonMark said:

In 1991 three family members helped the mother in law buy a small seaside flat. We provided all the funding. In consideration it was agreed that the MIL would hold the property in trust for the three of us. A solicitor arranged a simple deed to recognise this. There was no mention within the deed about the right to live in the property for her lifetime. The deeds were registered in the MIL's name. Sadly she has now passed away. I am the executor. I have two questions that I would like help on:
1) The HMRC Estate Report asks whether the MIL benefitted from, or had the right to benefit from a trust in their lifetime? This goes on to ask if she had the right to live in a house that was held in trust during their lifetime? Should I say yes to either/both of these questions?
2) My understanding is that the three of us will have a substantial CGT liability if the flat is sold. However as we bought the flat with the sole intention of providing the MIL with a home would it be possible to argue the case with HMRC that she did have an interest in possession of the flat?
Many thanks.

I suggest the best person to help you is the solicitor who drafted the deed - or if they aren't around, any competent high street lawyer will be able to assist. Without seeing the documentation it would be foolish to start speculating here - and the answers aren't quite the simple yes/no you're doubtless hoping for!

Keep_pedalling

As for your second point, if the house is owned by a trust then it Is the trust that would be liable to pay CGT not you siblings, which would mean the tax free allowance would only be £6,150 not 3x £12,300.

However, if the property was in trust I would have though it would be owned by the trust and not in your mother’s name. You need to take professional advice on this.

xylophone

The OP states

In 1991 three family members helped the mother in law buy a small seaside flat. We provided all the funding. In consideration it was agreed that the MIL would hold the property in trust for the three of us. A solicitor arranged a simple deed to recognise this. There was no mention within the deed about the right to live in the property for her lifetime. The deeds were registered in the MIL's name. Sadly she has now passed away.

In essence, Tom, Nick and Harry put up the cash for Mrs Brown to buy a house on their behalf?

She took the cash, bought a property and registered herself as the legal owner but it would appear that the Deed indicates that she is not the beneficial owner?

Either she is the Trustee of a Trust and the property is a Trust asset or she is a nominee for Tom, Nick and Harry and the property belongs to them?

getmore4less

What does the trust deed say?

SuttonMark

getmore4less said:

What does the trust deed say?

It's a simple format. All it really says is "In consideration of the payment made by Tom, Nick & Harry , Mrs Brown hereby acknowledges that she holds the property on trust as to one half for Tom and the other half for Nick & Harry in equal shares." That's all.

xylophone

Mrs Brown was not the beneficial owner of the property.
Whether she was a (bare) Trustee or a nominee, she could not leave the property in her will as she did not beneficially own it or any part of it.
There was no interest in possession in her favour.
You should check with HMRC but it seems to me ( no expert) that the beneficial owners of the property  are (and always have been)  the relations and that therefore on sale, the liability for CGT  (difference between purchase price and sale value) must fall on them in the proportions of their ownership.