Transferring property held under a bare trust when the sole beneificairy has died.

Dear Forum,

I hope that you might be able to help with a steer on this issue relating to property held under a bare trust where the sole beneficiary is deceased.

The deceased passed away a few years ago and probate was granted to his son. A year ago it was discovered that property (a residential house) was held under a bare trust with the deceased as the sole beneficiary and his daughter as the sole trustee.The property was bought by the father and trust was created in 1997. The daughter had no memory of it although she affirms the deed of trust. The property was always managed by her father and she was never told why the father made this arrangement.

She wishes to transfer the trust property to her father’s estate so the property can pass to her mother along with the other assets of the father’s estate.

The son’s solictors are suggesting that the daughter execute a TR1 transferring the property directly to the mother.

I would be grateful if anyone could confirm this is the right pathway. It has been suggested that a better approach would be for the daughter to execute the TR1 to the son as executor, holding it under trust and then for him to transfer the property to the mother.

The daughter is also concerned about her personal CGT liability, but my understanding is that as the transfer would relate to property held under a bare trust, if the assets are transferred to the sole beneficiary’s estate. Would the TR1 to the son holding it on trust as executor make any difference in this regard by making the nature of the transfer clear or is that just an uncessary complication?

I would be very grateful for any insights or pointers.

Many thanks.


So long as the declaration of beneficial interest clearly and correctly sets out that the father had sole and absolute beneficial interest in the property - genuinely a bare trust - then the daughter will not have CGT responsibility at anytime (s60 TCGA92). On father’s death the property is rebased to probate value and is an asset of the estate at that point (was it declared as part of any IHT assessment?). the property should then follow the terms of his will - I would say regardless of whether the asset passes to the executor first or directly on to mother, (I assume mother is the correct beneficiary under the will? if not then consider DoV). But at no point should there be a CGT event for daughter (Caveat - unless the death was more than 2 years ago and daughter was entitled to the property under the will - in which case if she transfers to mum now and is out of time for a tax-effective DOV she might have a CGT disposal based on MV less probate value).

To protect against HMRC getting their knickers in a twist when/if they clock the disposal on the land reg, she might want to pre-emptively write to HMRC explaining that she was the legal owner of the property, but not the beneficial owner, and it has now been transferred in line with the beneficial owner’s death estate - enclose a copy of the declaration of beneficial interest confirming the fact. Of course, HMRC may not read it, so she should keep and copy of that letter and the declaration to help bat off any future questions from HMRC. If the daughter is in self assessment she might also include some narrative in the additional information for the relevant tax year (but again - they might not read it!).

I agree with the analysis but would almost invariably advise against trying to pre-empt HMRC. It has no legal efficacy and may attract an enquiry where otherwise none would be opened. In such circumstances I advised my clients to assume that an enquiry might be opened and to do now everything that they would need to satisfy HMRC as to the facts and to counter their likely arguments. Contemporary recording of all this will be highly persuasive and avoid later frantic chasing of tails and missing links to meet deadlines. Most importantly, witnesses of fact can have memory lapses or, with maximum inconvenience and gross lack of consideration, turn out to have died. Get their evidence down formally in writing now and have it suitably corroborated/attested. Then put the file in a drawer after reporting correctly and on time whatever current compliance requirements the law requires for the events that have taken place on the basis of your technical analysis.

Jack Harper

I would prefer to give full info to HMRC upfront to try and limit any potential for a discovery assessment later down the line, particularly if the owner is in SA, but it’s personal preference I guess. Either way, so long as the documentation is secure and the position is carefully recorded now, as Jack says, then hopefully there will not be any scope for HMRC to try and make something of it, now or in future.

Either way - a further note to the original poster: Don’t forget TRS! Assuming it has only just come to light, make sure it gets registered as a non-taxable express trust (doesn’t sound as though it will fall in any of the exemptions).

Many thanks for the feedback. The circumstances all appear to fit into the more straightforward scenario you set out.

Thank you.

Thank you for the advice.

Kind Regards.

Thanks for pointing this out.

Kind Regards.

You could file the deed of trust with the land registry (declare the bare trust by applying for a restriction) prior to executing the TR1.

In simple terms this is how you tell HMRC the property is held on trust.

I’d register the trust regardless (assumed non-taxable).

Execute the TR1 to the mother.

Richard C. Bishop