Client owns a holiday property worth £400K. There is a large uncrystallised capital gain.
At the moment, it is rented out for holiday lets for part of the year. The client also uses it occasionally, usually for family holidays with her adult children and the grandchildren. Ideally, the client would like to remove the value of the property from her estate for IHT purposes, postpone any CGT on the disposal, and carry on using the property on an occasional basis, as she does now.
It has been suggested that part of the property could be transferred into a discretionary trust, with the client retaining the remaining share. The intention is to ensure that the loss to the estate is less the NRB to avoid a lifetime charge to IHT.
CGT holdover relief would be claimed on the transfer into the trust.
The expenses and rental income would be divided proportionately in accordance with the respective shares owned by the client and the trust. However, I still have a concern that this arrangement would be caught by the GROB rules. The exception in s.102B(4) FA 1986 does not appear to apply as the trust (as donee) cannot be said to be ‘in occupation’. What do forum members think please?
Also, if the client continues to use the property for the odd week here and there, is that okay as long as it is in proportion to the share of the property she has retained? Or to be on the safe side, should she pay a full market rent for those weeks to avoid both GROB and POAT issues?