Purchase of second home in Family Trust for son?

Purchase of second home in Family Trust for son?

11:14 AM, 28th September 2021, About 2 years ago 4

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Hi All, My wife and I have a small property portfolio held in an LLP. We are in the process of purchasing a property for our 37-year-old son using the equity from our main home.

As he’s autistic and unable to handle his finances prudently, hence on completion we intend to put this new property into a family Trust together with our main home and the properties in the portfolio. The aim is to give him his own space with the corresponding responsibilities, we’ll see how that works out!

Unfortunately, to avoid our son laying claim to his new home on completion or in the future, thus being in a position to misuse the equity therein, my wife and I have to purchase the property in our own names, which makes it a second property for LTT Wales and higher Council Tax purposes, and paying £8,000+ in LTT instead of the first time buyer rate of around £500. A few questions:

Is there any way to lessen the higher rate LTT burden?

After completion, and placing his property into the family Trust, can the Trust then rent the property to our son so he (or we, as he’s not working) pays the normal Council Tax rate?

Would another option be to include it in the LLP and the LLP rent it to our son, or does that complicate matters even further?

I’m in my 70’s now and trying to get our affairs in order, along with setting up the family Trust we made our wills and appointed our other children as executors.

Any advice or suggestions would be really appreciated. Maybe there are no alternatives, in which case we’ll know we’ve done all we can and are obeying all the rules!

Many thanks for reading.


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Mike Workman

11:59 AM, 28th September 2021, About 2 years ago

Hi. We too have a son on the autism spectrum and we set up a company to hold the properties. My daughter is a director and Class A shareholder while my son is a class B shareholder but not a director. I am a director but not a shareholder. Doing it like this allows us to declare dividends for Class B shares according to our son's needs while keeping control of the portfolio. An alternative we looked at was creating a trust to hold the class B shares, but this seemed too complicated and of little benefit.
Hope this helps

Mike in Worthing

12:41 PM, 28th September 2021, About 2 years ago

Purchase the property in your son's name (I assume you have LPA) where you are the mortgagees. A restriction on the Land Register prevents sale until you have been reimbursed 100% of the equity.
This avoids trusts and higher rates of LTT. It has one downside. Your son could still sell the property (after some inflation), reimburse you and squander what remains.


10:29 AM, 6th October 2021, About 2 years ago

Reply to the comment left by Mike in Worthing at 28/09/2021 - 12:41
Thanks Mike. Putting the property in our son’s name could lead to problems with his benefits. We don’t have LPA. The Trust people say my wife and I should purchase it in both our names, then put it into the Family Trust. Could the Trust, or the LLP, then rent the house to him? Receiving benefits (he can’t work at present) he wouldn’t have to pay Council Tax, whereas if it’s a Second Property in whatever form it could be liable to FULL Council Tax plus 100% “premium”. It’s a pity we couldn’t buy it in HIS name, then the Land Transfer Tax due is less than £500 instead of about £8,000 when it’s a second property. Talk about confusing!

Mike in Worthing

11:38 AM, 6th October 2021, About 2 years ago

I repeat what I said before. My understanding is that it is only savings or investments which affect benefits. Your own home does not count. He would have zero equity at the outset because you as mortgagees would own it.
If you haven't an LPA, it's not too expensive to draft one.
I know very little about trusts, therefore cannot comment.

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