Tax implications of property in PD Trust

se2020

Mrs A has died.

Mrs A owns a property outright. The will create a lifetime interest trust for their partner (Mr B) not married.

This property is currently rented out.

The executors of the will are named as the trustees for the property. They are also the children of Mrs A and will eventually inherit the property when Mr B dies.

Mr B has requested that the estate give him the property with vacant possession.

He will not be living in the property himself.

The property has been valued at £400k (with vacant possession) and the valuation says to discount by 15%-30% as it was rented out on the date of death so valuation for probate is, at most, £340k.

Are the following assumptions correct:

Additional NRB is not available to the estate as the property does not go directly to the children?

If a valuation of £340k is used for probate, then the existing tenant is evicted by the estate will the value be £400k upon creation of the trust? If so, will a CGT bill be payable at that point on £60k?

Who pays this bill? The estate or the trustees?

Is the trust subject to 6% tax on £400k (property value) every 10 years?

Who pays this bill?

What happens when Mr B dies? Is there yet another 6% tax? Presumably this can be taken from the sale of the property and the remainder given to the children?

Keep_pedalling

From your previous threads this is not something anyone on here can advise about because it is far more complicated than this opening post suggests, you need professional advice. The property was not left to him it was left in trust with him as the beneficiary along with a linked property that was their family home.

He will never be the legal owner of either property so I do t understand the the rental property being given to him as he is only entitled to the income from the property. Because they never formalised their relationship your mother’s will has created a bit of a financial disaster. The marital home if not covered by the residential NRB so her estate only has the standard £325k NRB exemption which I imagine is leaving the executors with a substantial IHT bill to pay some of which may have to come from the sale of the rental property and some from the residual estate or all of it from one of those depending on the exact wording of the will.

As for your mother’s partner’s estate, for IHT purposes that will include all the assets in trust at the time of his death. You probable should seek advice from a solicitor (and probable an accountant as well) with the appropriate STEP qualifications to deal with complex trusts (certainly no one involved in drawing up her will)