I have a client who owns 50% of his main residence. The other 50% is owned by the trustees of his late wife’s will trust, in which he has a life interest.
My client wants to gift £325,000 of his interest in the property (about two-thirds of his 50% share) to a discretionary trust.
I understand that he would need to pay a market rent on the share he transfers to the DT, but how do you calculate what a market rent is on two-thirds of a 50% interest in a property?
Many thanks,
Jane
Hi Jane,
You would need a surveyor to undertake the valuation and to confirm the market rent for the share passing to the discretionary trust.
The client needs to be aware of the fact that this needs to be reviewed on a regular basis (usually annually) to ensure that the amount being paid continues to reflect the market rate.
I have also obtained current market rentals for similar local properties from local letting agents and Zoopla or Rightmove. You would then need to pro-rate the annual market rent to one-third (two thirds of 50%). There is a technical argument that a further discount could be applied for the joint ownership [there would be 3 distinct joint owners - 2 sets of trustees and the individual client] however, as he is beneficially entitled to occupy the whole property I probably would not bother depending on the actual numbers, although I have seen that succeed in practice in an argument with the District Valuer.
Maxine Higgins
TC Citroen Wells