Can I put my main residence into a Trust?

The short answer is: you can. But “should you?” is the question. I, personally, do not see the advantage. Certainly, you can place it into a trust and after seven years, you place it outside of your estate. But why would you do that?

Table of contents

The short answer is: you can. But “should you?” is the question. I, personally, do not see the advantage. Certainly, you can place it into a trust and after seven years, you place it outside of your estate. But why would you do that? If you were doing it for care home purposes, it's possible that the local authority would raise the objection that this is a deprivation of assets issue, and therefore it wouldn't count anyway. If you were doing it for inheritance tax issues, you would have to pay rent to the trust.

If you placed your property into trust, let's say you place half of it, you then have to get the value of the property for rental purposes assessed, and then you have to pay rent to the trust. So where does the rent money come from? It comes from your taxed income - you pay tax on it once and when the money goes to the trust, the trustees now have to pay tax on the money at 45%. That income could go out to the beneficiaries, and it could be offset the tax so it could end up only being a 20% tax rate, but you still paid two lots of tax. Now, the property is no longer a main residence. So how much of the property is put in? Do you still have your Residential Nil Rent Band allowances available to you? Because, remember, you have to have 175,000 of the value of the property in your name passed to your immediate beneficiaries before you can use the Residential Nil Rate band. But also, that property growth from the day that you gave it into the trust is now allowed with the capital gains tax as well. So, you've got two lots of income tax and capital gains tax. Well, have you saved anything? I don't know that you have. I think you're probably worse off than just leaving it alone.

Generally speaking, rather than putting main residence into trust, life insurance should be looked at. Potentially equity release could be looked at – you take an equity release on the property, give the money away, buy business relief plans, instead. It is much more effective than placing a main residence into trust.

Join our Newsletter

Subscribe and get the latest updates about inheritance tax and Estate Planning into your mailbox.

We help people with over £1 million in current assets pay ZERO in UK inheritance tax

One stop comprehensive specialist advice - Tax, financial planning and legal advice service with 18 years experience.

What our clients say
Read our 118
    

"It is gratifying to finally come across an adviser who gives sensible ongoing advice which is very client focused."

Frank Hibberd

Retired gentleman

"It is nice to know that we can now be certain that our daughter will inherit our money without giving a large slice of it to the government ."

Tony & Sue Perriss

"Everyone's situation is different but having an initial discussion with Charles has really helped me personally navigate what can be a daunting subject."

Bobby Chadda

"I particularly want to thank you for the open and transparent manner in which you have serviced my tax planning needs since I first met you seven or so years ago. In arranging my tax planning through you, I have confidence"

Michael Mahon

Retired gentleman

"Charles was really helpful from the outset and quickly clarified our situation for us... I have used Bluebond for  IHT and other tax advice and they have been very helpful with both. Charles is a very experienced and knowledgeable individual and I highly recommend Bluebond's services."

Sam Attenborough

Retired gentleman

I have used Bluebond for setting up a discretionary trust for my children as well as inheritance tax and estate planning for my home and  other properties. Having searched for years, it was only after meeting and speaking with Charles that I felt confident enough to take these next steps, and I'm very glad I did. His ability to explain complex issues in simple terms and walk you through every step of the process is quite simply unparalleled.

Imran Qureshi

Excellent and comprehensive advice concerning all things financial in one place. Enthusiastic, Educational, Expert, value oriented, Professional and Polite are adjectives that come to mind as well as great attention to detail.

Deirdre Buckley

Inheritance tax is a minefield. Charles de Lastic of Bluebond Tax Planning is the best in the business at helping you to chart the path that is right for you to ensure your estate is structured in the most tax efficient manner.

Nicholas Dickinson

Charles provides clients with valuable insights that clearly demonstrate expertise built over the years. Charles and his team guided us through a estate planning journey and then addressing complex Inheritance Tax matters. They have been very transparent with their advice and cost. Overall an excellent service. Highly recommended

Shailesh Karia

The information contained in this web site is for UK consumers only.  Like most firms of solicitors and accountants, Bluebond Tax Planning is not regulated by the FCA. The content of this website does not constitute FCA regulated financial advice and all content is provided for general information purposes only. Bluebond is not responsible for any action you may take as a result of information on this site. All advice will be delivered on a personal basis once we fully understand your situation and our client agreements have been signed.

Copyright © 2024
Copyright Notice
Legal Disclaimer
Terms & Conditions
Privacy Policy