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Dear all, I am confused (still) about the best course of action and would welcome any comments please.
I have 2 sons (18 & 19) and am seeking to reduce my income tax liability by using their personal allowances whilst they are at university (to help with fees etc)
I have a BTL house and my accountant is suggesting putting it into a discretionary trust for the boys and thereby reducing tax as well as future IHT plus the benefit of protecting the asset and providing them with an income should they fall on hard times.
Seems like a no brainer, however, there is the set up cost, on going cost and the possibility of any changes to tax laws in future, plus it would be difficult to raise finance on the property in future.
We would also have to clear the mortgage first.
Another thought would be to sell the property and give them the proceeds when they are ready to buy their own homes, however, then we will have a huge CGT bill!
I was thinking whether I could gift them the property in small percentages (using our yearly CGT allowance) however not sure if legal costs/surveyors costs would make this worthwhile? I have been advised to do this into a LTD co if at all.
You probably need to pay a tax expert to look at family aims and current/future wealth and formulate a few options.
Whenever money/wealth changes hands there is always a hidden 3rd party present ie tax man.
I'm now the sole beneficiary of an inherited property held in a bare trust. I've done ok from the rental income but so have the trustees. I'm awaiting completion on the sale of the property and will be investing the proceeds into a Family Investment Company. My daughter is about to start university and this offers a good solution for our circumstances.
A professional comparison of all costs between a DT and a FIC would be beneficial for you. Don't overlook the IHT charges on DTs.
I find with this sort of thing there is always a sting in the tail
you will pay tax
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Someone owning a 1% share in a property could be allocated a disproportionate share of its rental profits.
How does this work?
Have a look at 'tenants in common' and 'declaration of trust'
Even if you plan to eventually pass property on, don't tell 'em! I told my 3 sons I plan to drink all the assets: I'm wanting my kids to grow up hard-working and self-sustaining. A sad consequence of some people being told they will inherit is they stop trying.....
One thing to consider is that if your children are property owners, they will pay the additional stamp duty when they purchase their own property. Someone correct me but I think that is right
I think you are right, my son has been been given an interest in his uncles house by deed of trust so is counted as a property owner. He will have to pay higher stamp duty as we understand it.
That is correct, they'll also be liable for the council tax if its empty. By using a trust or a company the children don't have direct ownership (bare trusts being the exception).