Client wants to transfer property she solely owns to daughters. She is 91 and wants to make life easier after she dies. No IHT and realises care fees would be subject to deprivation. Have cautioned against but client wants to go ahead. Daughters only beneficiaries under will. Daughters concerned about protecting mum. Should I do a standard TR1 and declaration of trust or should I do a more detailed right of occupancy lifetime settlement? If the latter can anyone point me to a precedent?
Paul Mounce
Gosschalks
I had a similar situation recently and dealt with it by a transfer of the legal title into joint names of mother and daughters, with a declaration on the TR1 of holding on trust for mother absolutely.
Daughters can then still easily deal with the property on death of mother, but mother has some security in the meantime by still having her name on the register. Also, there is no actual “gift”, and no need to protect the right of occupation.
Diana Smart
Gordons LLP
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Diana’s suggestion is very straightforward and, presumably if one or other daughter predeceased mum, there would be no IHT detriment as held on trust for mum absolutely. What is the SDLT treatment here?
Caroline Coles
Waughs
There is no SDLT charge because there is no consideration, and indeed no value, passing between mother and daughters.
Diana Smart
Gordons LLP
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But if we made them all legal owners wouldn’t there be problems if either of the daughters got divorced and/or went bankrupt. Also (not that this is an issue here) given that they do not live at the property wouldn’t there shares be potentially liable for CGT?
Paul Mounce
Gosschalks
No Paul, there shouldn’t be any problems with divorce, bankruptcy or CGT, because the key point is that the daughters will have no beneficial interest in the property – they are simply legal owners holding on trust for mother, probably jointly with her. Provided that is made clear in the transfer deed there is nothing for a divorcing spouse or trustee in bankruptcy to claim, and no CGT for the daughters. Mother will still be entitled to claim PPR on the whole property, and there would be a tax free uplift on her death in the usual way.
Diana Smart
Gordons LLP
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