Buying out family member's share of a house (formerly held in trust) - logistics?

silvermum

When my father died my two children and I received an inheritance. Since they were under 18 at the time their share was left in trust with me and my brother (both executors of the will) as trustees. Money was invested in a property in which we had equal one-third shares (me & my two children). My brother and I, as trustees, are named on the Land Registry as registered owners.

My children have always been aware of the trust/ property.  I have managed it over the years, doing relevant accounts, making payouts etc.

The ‘children’ are now in their 20s so the trust has effectively lapsed, but we haven’t yet changed the names on the Land Registry. Our eldest child would now like access to their third of the investment in order to buy their own home.

My husband and I are in a position to ‘buy out’ their share with savings (no mortgage needed) and continue to manage the property until our second child wants their share, at which point we may sell. I’ve already got several valuations from agents and I think we’ll be able to agree a market value figure.

What’s the correct/ easiest way to do this transfer? Do we need a lot of input & management from conveyancing solicitors? What are the key tasks? Any pitfalls to watch out for?

Keep_pedalling

What sort of trust are we talking about? Unless the will specified something ease their shares should have been held in separate bare trusts which they should have had access to from their 18 birthdays.

There may be some complex tax issues in releasing capital for your sons and you really should take professional advise from a trust expert.

silvermum

A bare trust and both were informed advised they had access/ could request to release the funds if they wished. Advice I had was that it continued as a kind of nominee account with the former trustees managing it, so long as the beneficiaries were happy with this arrangement (they were).

SDLT_Geek

silvermum said:

When my father died my two children and I received an inheritance. Since they were under 18 at the time their share was left in trust with me and my brother (both executors of the will) as trustees. Money was invested in a property in which we had equal one-third shares (me & my two children). My brother and I, as trustees, are named on the Land Registry as registered owners.

My children have always been aware of the trust/ property.  I have managed it over the years, doing relevant accounts, making payouts etc.

The ‘children’ are now in their 20s so the trust has effectively lapsed, but we haven’t yet changed the names on the Land Registry. Our eldest child would now like access to their third of the investment in order to buy their own home.

My husband and I are in a position to ‘buy out’ their share with savings (no mortgage needed) and continue to manage the property until our second child wants their share, at which point we may sell. I’ve already got several valuations from agents and I think we’ll be able to agree a market value figure.

What’s the correct/ easiest way to do this transfer? Do we need a lot of input & management from conveyancing solicitors? What are the key tasks? Any pitfalls to watch out for?

Here are some thoughts as to how you might document this:

1.  A deed of assignment of a one third beneficial interest from your eldest child to you and your husband in return for the cash price agreed.

2.  A transfer of the title from your brother and you into the names of the beneficial owners, who will then be you, your husband and your younger child.  It could specify the shares in which the property is now held (perhaps 3/6 to you, 2/6 to the younger child and 1/6 to your husband).  This transfer is for the purpose of changing trustees of the legal title and would not be for payment.

3.  There is a purchase by you and your husband for Stamp Duty Land Tax purposes (assuming the property is in England) and SDLT is likely to be due if you are paying £40,000 or more for the 1/3 share.

If the names on the title do not match the beneficial ownership, a registration should be made with the Trust Registration Service.

silvermum

Thanks.

I presume the eldest child will become liable for CGT on the transfer of their share of the property? But will they be able to offset 1/3 of the relevant costs from purchase? (I'm a bit hazy on this bit - need to read up!)

silvermum

Oh, and presumably, given changes to CGT it would be best to effect any transfer THIS tax year??

Keep_pedalling

Yes, any CGT liability will need to be paid within 60 days of the transfer. His share of buying and selling cost can be deducted from the gain. And yes it would be better to complete by the 5th April.

Unfortunately both will have lost their first time buyer status.