Claim for Implied Trust of Property by Child

We are dealing with a matter where a parent has purchased a property in their name for their adult child to live in. This is due to the adult child not being able to obtain a mortgage. The adult child has made all payments towards the mortgage and outgoings of the property for 20 years.

The parents now wish to gift the property to their daughter and are concerned about CGT and IHT. There is of course the option to transfer into trust and claim s260 relief, however, would it also be possible in this case for the daughter to make a claim for an implied trust instead?

Thank you in advance to any help.

Charles Dibley
Daniel Woodman & Co Ltd

This does sound like a case where there might be an implied/constructive trust, but you need to be careful not to guide the clients too much in trying to establish whether that is correct. For example, it might be helpful to ask questions like, whose property is it – yours or your child’s? and what would you anticipate happening to the property on your or your child’s death? Also, if they have given the property to the child in their wills, that indicates that they regard it as their property, and the child’s payments might be more in the way of rent, but that can also be a tax minefield.

Note that if you flip in and out of trust and claim holdover relief, I believe that the child/trustees cannot claim main residence relief after that, even if the property is transferred out of trust to the child.

Diana Smart
Gordons LLP

In the absence of any express intention at the time the property was purchased between the parties as to the child having a beneficial interest, any implied intention (based on the respective parties’ conduct) requires at least that the child has acted to their detriment believing that she was to have such an interest (payment of mortgage and other expenses related to acquisition may constitute detriment).

Malcolm Finney