Declaration of trust and capital gains tax future implications

s77

Hi all,

Would anyone know the implications of the following on capital gains tax:

Husband is sole legal owner of a second property.

A declaration of trust is then set up with his wife as a beneficial (not legal) owner.

Husband dies and wife inherits the property. 

Would capital gains be set to market value for the entire value of the property upon the wife inheriting, or would the fact that the wife had previously been a beneficial owner mean that should she sell the property at a later date, she would be liable to her share of capital gains as assessed from the year that the declaration of trust had been set up?

Many thanks for any guidance.

Jeremy535897

If the wife is already the beneficial owner, there is no "inheritance" when the husband dies. His executors must transfer the legal title to the widow.

There will be no capital gains tax free uplift on the husband's death. The capital gains tax cost of the property will be based on the acquisition by the husband. The date of the declaration of trust is irrelevant, and so is the property's value at that date.

s77

That's super clear, thanks ever so much for your response.

Jeremy535897

If you meant that the husband transferred only half the beneficial interest in the property, then what I said above applies to that half, but the other half she would inherit from her husband, at its market value at the date her husband died, for capital gains tax purposes.