I own a London apartment in my name, which I bought when I was young and single. Now I am married with young children and am writing my will. I would like the London apartment to be put into my trust when I die (and I do expect the kids will move into it eventually one day). Please, could you tell me if putting the apartment into the trust when I die (rather than gifting it equally to my children or to my husband) would create any additional taxes (e.g. stamp duty, inheritance tax, etc)?
Arthur Weller replies:
If the will is worded so that there is no cash alternative to the legacy/gift of the property to the trust, then HMRC guidance in its Stamp Duty Land Tax manual (www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm04045) explains that there should be no stamp duty land tax on death when the property is transferred to the trust. Assuming that this is a discretionary trust, then a transfer into it on death will use up (part of) the inheritance tax (IHT) nil rate band, and if the property is worth more than the nil rate band, then the excess will be subject to IHT. However, if you would transfer directly to your husband on death (perhaps with a ‘letter of wishes’ that he should subsequently transfer to the children - note the recent Sir Bruce Forsyth case) then the nil rate band will remain unused, and whatever the property is worth, there will be no IHT on death. Whether the property is transferred into a trust, or otherwise, there is no capital gains tax on death.
This question was first printed in Tax Insider in January 2018.