Advice on Registering a house in a trust with HMRC

AppleCore91

Hi All

I was wondering if you could give me some advise on the best way to register a house in a trust with HMRC. I have got legal advice, but I seem to be getting some conflicting advice so want to make sure I know the score before I pay any money out.

The background is my mother passed away in December 25, and left her half of the house to me and my sister, but giving my father the right to live in the house.

I know this has created a post-death interest trust, which needs to be registered with HMRC and none of us have an issue with that. It is well documented that that's what needs to happen with the paperwork that was with the will, and that's the legal advice I have been given.

It's what to do with the trust that I am getting conflicting advice on.

One solicitor is telling me once the trust is set up, you don't need to do anything more as it is registered to the property with my mothers details and me and my sister will be listed as beneficiaries.

One is telling me that we need to change the deeds with the land register to put half the house into the trust, but we have to pay the land register fees to make this happen.

These are both with the same firm, but I think one is quite new to the job (which is no means a criticism - we all have to start somewhere and learn), so might not have the expertise yet in this field. This is the same firm that wrote the wills, but I don't believe the person who wrote the wills works there anymore.

I do have a solicitor that lives down my street, but unfortunately this isn't his area of expertise (and nor is it of anyone in his place of work), but he did say it sounds right that it needs to be registered in a trust but can't advise any further on what needs to be done and what the right process is.

I, of course, want to make sure I do the right thing, but I also don't want to pay out any money on something that doesn't need to happen, or the wrong thing based on wrong advice. I don't partially want to move to a different solicitor when we have paid out already. It would be nice to be able to go back and say to one of them 'you are right, please proceed'.

Also, one thing that we haven't managed to find out, is how does the house come out of a trust and into me and my sisters name. Would that be another land registry deed change?

Many thanks in advance.

Keep_pedalling

It is not necessary to do it, it would provide an extra bit of security for you and your sibling should your mother remarry or try to sell the house and disappear with the proceeds but unless there was a realistic chance of those things happening you can leave things as they are.

AppleCore91

Thank you for your reply. I thought we had to do it, so I'm a bit more confused now.

As half the house was in my mothers name, and half is in my fathers name, do we not have to register the deeds in any way, or it is fine to leave that part as it is as well, even though one has passed away so I am guessing they technically don't own 50% of the house anymore.

I thought that was the whole idea of the trust, and why we are being advised to put it into a trust (although to be fair, as it was in the notes with the will, we have told the solicitors that the house needs to go into a trust so that might be why they are following it through). I thought that the 50% left to us went into a trust rather than us owning it at this stage, then we get ownership of the house at a later date.

There is zero chance of anything happening like the house being sold or me & my sister selling it from underneath him or him re-marrying or selling the house, but we want to make sure we are doing everything legally, but it would certainly be less of a stress knowing we can leave the house as it is without there being any repercussions.

I'll go back to the solicitors that we are using to get confirmation that it needs to go into a trust and ask them if it is ok to be left how it is.

Keep_pedalling

The trust already exists, created be the will. Even though it earns no income it still has to be registered with HMRC within two years of your mother’s death, but changing the LR records to replace the trust is optional.

poseidon1

You have two separate issues here. There is the trust registration process with HMRC which is mandatory with potential fines for non compliance. Its a straight forward online process per link below:

https://www.gov.uk/guidance/register-a-trust-as-a-trustee

As regards the legal title and the Land registry, even amongst professional private client lawyers there is debate as to whether a Form A Restriction on the register is sufficient to protect trustees ( and the underlying trust beneficiaries) , or if trustees should also be registered as co legal owners in addition to the restriction - see link below

https://trustsdiscussionforum.co.uk/t/registering-the-ipdi-against-the-property/12598

Ultimately, it is up to you whether you do nothing and leave the legal title 'unprotected' or adopt best practice and go for the Form A Restriction together with registration as co legal owners ( in a trustee capacity) alongside your father's 50% personal ownership.

In passing you should note that I have come across a scenario where a surviving parent took out at an equity release loan on an IPDI trust property unbeknownst to the trustees , and was able to do so because there was no indication on the land registry that a trust exsisted since the trustees ( in this case step children), had done nothing to protect their interest in the trust property. A cautionary tale against the idea of doing nothing.

AppleCore91

Thank you both for you replies - at first I thought Keep_pedalling meant don't worry about the trust, that got me totally scratching my head as that goes against everything that we have been advised, and against all the notes that were in with the will (it also helps that we also 100% know what it is meant to be that way).

I've already had a nose at that page to try and work out what the answer was as well, which does look quite easy to do.

I'm assuming that the answer to the question 'Has the trust acquired land or property in the UK since 6 October 2020?' is yes, and that is where the property gets registered in the trust?

What do we get back once the trust is registered? Do we get some letter that we keep to show that the trust has been registered and I assume it would show me and my sister as beneficiaries, and mention something about the house?

Thank you for the further advise. As it stands as I type this out i'm not concerned at all that my father will either remarry or take a loan out. I'm also not concerned that my sister will try anything underhand, and likewise she is not concerned that I would do anything underhand. But i emphasise the point as i type this. Who knows what the future might bring. I think we are going to make sure the trust is sorted and correct as that is a legal requirement that we have to do and get in place. Once that is done, then we will have a chat about the best way forward. We do 100% want to protect all three of us, so we might go out to someone different who is a specialist in land ownership to see if we do a Form A Restriction (and just for the record, our gut feelings all say we should do it as we don't know what the future might bring and we don't want to be left with any surprises).

poseidon1

No the HMRC Trust registration service is not there to register the property. It is to register the exsistence of the Trust which is a separate and distinct standalone entity. The fact that the trust happens ( in your case) to hold a non income producing property, is merely an incidental that means the trust is not a taxable entity in HMRC's eyes.

As for what happens after you register the trust with HMRC, they will typically within 15 days write to you confirming the trust's Unique Reference Number (URN), which you use for any future trust changes such as change of trustees, or death of the Life Tenant resulting in the trust termination.

Importantly, HMRC do not communicate or liase with the Land Registry about the trust or relay any information about the asset it holds. That is something you have to handle direct with the Land Registry ( possibly via a solicitor on the basis they have discussed with you), if you want protection of the property title in your capacity as trustee, as outlined in my post.

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AppleCore91

Thank you. My Sister's Friends husband is an estate agent, who has put us in touch with the solicitors that they use, and they are happy to help us out, providing that the trust is registered first. This doesn't mean we will do anything but he is happy to talk through our options. He seemed to know what a Form A Restriction was when we mentioned it to him, which gives us the confidence to proceed.

I've registered the trust myself (hopefully I have done it right as I clicked on no for all the options), and when it comes through I'll pass it across to the solicitor to sort. If I've not done it right, I've got plenty of time to do it again.

Decided to register the trust myself so we have the freedom (or don't feel obliged at least) to use the solicitors that we are currently using as they haven't done the work for us.

cherry76

Went on through something similar when dad died more than a year ago. Trust registered with HMRC. Mum has instructed her solicitor to add our names as trustees to the title deed at a cost of £800. There is the option of doing nothing and leave title deed as it is.