Question Related to Declaration of Trust

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    Question Related to Declaration of Trust

    Hello All,

    I own a mortgage free house but due to work reasons, I may need to move to another city which may not even be commutable from my home so I am thinking of renting a property in the new city for myself (to get used to surroundings) and offset the rent expense by renting out my house. I could keep it like this for 6-12 months before deciding to permanently move.

    I am a high tax payer whereas my wife doesn't work. I fully trust her so how do i ensure she gets the rental income from our house so i don't have to pay 40% tax on the income?

    Is declaration of trust the way forward?

    Thanks,

    #2
    First you need to share the property with your wife.
    The you use a deed of trust to share the property in the proportions you want (from the sound of it 99:1 in her favour).
    Then you notify HMRC using "Form 17" of the new split.

    A family solicitor would be able to do this as a fairly standard project - its very common.
    However, it's best that any wills and other trusts are kept in synch - your wife will own the property and you (presumably) want the ownership to survive one of your deaths.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thanks.

      What do you mean by "First you need to share the property with your wife". Isn't deed of trust declaring the sharing part?

      Thanks,

      Comment


        #4
        Originally posted by calyps View Post
        Thanks.

        What do you mean by "First you need to share the property with your wife". Isn't deed of trust declaring the sharing part?

        Thanks,
        Yes it is. But you should add her to the land registry as an "owner" as well.

        Bear in mind that if was previously your main residence, and wife was not an owner during that period, you might potentially be eliminating some of your CGT benefits (the period of ownership carries through to wife with your original purchase date/price, but that may not apply to various letting reliefs -- I am not sure about this though)

        Comment


          #5
          Originally posted by calyps View Post

          What do you mean by "First you need to share the property with your wife". Isn't deed of trust declaring the sharing part?
          I was going to ask the same question. Is there a reason why the OP couldn't (or shouldn't) just make a declaration of a bare trust on the lines indicated in HMRC's Trusts, Settlements and Estates Manual (link below)?

          https://www.gov.uk/hmrc-internal-man...anual/tsem9520

          As I understand it, the legal title would then remain registered solely in the name of the OP, but the beneficial interest would (wholly or partly) belong to the OP's wife. Is there an advantage that I am missing (tax or otherwise) in first putting the legal title in joint names?

          Also, in the above link I am slightly puzzled by the HMRC statement that the donor/trustee does not need to register the bare trust with the Land Registry. I am sure I have seen it said elsewhere that a Form A restriction should be entered on the Land Registry register. But perhaps that is only optional, and if so does anyone know what the benefit is in doing so?

          Comment


            #6
            I think it is the case that you need to own it as a tenant in common with spouse and then declare to HMRC (via form 17) a different ownership % from the default 50% (which should match that in the deed of trust).

            I don't think (??) it is possible to own a property as a tenant in common simply via a deed of trust without parties being on legal title.

            Certainly it is possible for wife to have beneficial interest via DoT, but I am not sure that will convincingly satisfy the Form 17 (and associated) requirement.

            Bare trusts in general don't need to be entered on the land registry.

            Comment


              #7
              As I understand it (and I'm happy to be shown to be wrong as it would help my understanding)...

              Tenants in common can have specified shares in a property or not.
              If there's no split specified in the title, the presumption is that the beneficial split is 50:50 (even if the title is split differently, the beneficial split could be challenged - for example, if a wife gave 90% of a property to her husband but carried out paying for all of it).
              The trust is an agreement by a married couple to document the split that they want to have, and, because they're married, HMRC agrees with how they decide to manage their affairs.

              The trust in the link above is a bare trust, and that's fine if you want to give all of something to someone, but not for a change in the percentage of beneficial ownership.
              You want a solicitor to draw up the documents properly - the recipient of the prercentage is really gaining the percentage they're given, it's not something you want to get wrong.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                Originally posted by jpkeates View Post
                As I understand it (and I'm happy to be shown to be wrong as it would help my understanding)...
                Agree with all that, except that bare trusts do not have to be for the whole. Indeed they are a common mechanism to gift a property in small slices (each within CGT threshold).

                Comment


                  #9
                  So is the suggestion to change the land registry and include my wife name as well? And change the beneficiary % to be 99:01?

                  Though i read it somewhere that trust itself is enough.

                  Comment

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