Category Archives: Registering land

How does Stamp Duty Land Tax affect the purchase of residential property for trusts?

By | Registering land, Trusts | No Comments

A common question which arises when considering the purchase of properties where trusts are involved relates to Stamp Duty Land Tax (SDLT), following the introduction in 2016 of the additional 3% SDLT charge above the standard rates for purchases of “additional residential properties”.

Trusts are commonly created either during someone’s lifetime or through their will in order to protect family wealth. In order to ascertain whether the higher rates will apply to residential property held within the trust, it is necessary to consider the nature of the trust and the beneficiaries’ interests.

What is a Bare Trust?

Beneficiaries of a bare trust have a right to all of the capital and income at any time provided they are over the age of 18.

Any residential property purchased by the trustees will be treated as if the beneficiary had purchased it for SDLT purposes. It is therefore necessary to consider the circumstances of the beneficiary when ascertaining if the 3% surcharge would apply.

Provided the beneficiary does not own another residential property anywhere in the world, or is otherwise replacing his main residence, the surcharge will not apply. If however the beneficiary is under 18, the child’s parents are treated as purchasing the property for the purposes of the higher SDLT rates.

Life Interest or Interest in Possession

Beneficiaries have a right to live in the property or receive the income (less any expenses) from the property as it arises.  A life interest trust is commonly used in wills so that the surviving spouse/partner can continue to live in the property but the deceased spouse/partner’s share is owned by the trustees rather than passing outright to the surviving spouse. The question in relation to SDLT therefore typically arises when a surviving spouse/partner is looking to downsize.

For the purposes of SDLT, the beneficiary with a life interest, or interest in possession, will be treated as owning the property. Provided the new property replaces the life tenant’s main residence, the higher SDLT rate will not apply even if the trust owns other residential property.  If the trust owns a residential property and the trustees or the beneficiaries purchase another residential property and are not replacing the main residence, they will be liable to the higher rates.

What is a Discretionary Trust?

Under a discretionary trust, the trustees make decisions in relation to the distribution of income and capital (usually guided by a letter of wishes). As the trustees can choose who benefits from the trust, and how much a beneficiary should receive, no beneficiary has an automatic right to anything from the trust.

In this situation, the higher rates of SDLT will apply to all purchases (including the first purchase) of residential property by the trustees (where the consideration is £40,000 or more and the property is not subject to a lease with an unexpired term of more than 21 years) as the beneficiaries’ interest is considered to be too remote. Depending on the structure and terms of the trust, it may be possible for the trustees to consider their options before proceeding with the purchase.

If a beneficiary is looking to purchase a property for themselves, rather than the trustees, whether the surcharge will apply will depend on the beneficiary’s own circumstances.  

In summary

Trustees should seek advice on this when buying residential property, particularly as they are liable for submitting the land transaction return and paying the SDLT, and trust beneficiaries must take into account the nature of their interest when looking to buy a property themselves.

 

The Grant Application

By | Estate Administration, Registering land | No Comments

Once you have all valuations for the assets and liabilities in the estate as at the date of death, you have everything you need to begin putting together the application to obtain the Grant of Probate or Grant of Letters of Administration.

The Grant of Probate or Grant of Letters of Administration (collectively known as Grant of Representation) is the legal document issued by the Court (Probate Registry) providing the Executors, Administrators or Personal Representatives of the estate with the legal authority to deal with the deceased’s estate.

A Grant is not always required and there are some instances where the administration of an estate can be carried out without obtaining a Grant. For example:

  • Where a property is held in joint names (joint tenants) and passes by survivorship to the other joint owner(s)
  • Where there are joint bank accounts and only a death certificate is required in order to have the deceased’s name removed from the account and transferred into the survivors sole name
  • Where the amount in any solely held bank accounts is small (banks and building societies have limits as to the value of assets that they will release without seeing a Grant)

There is a common misconception that you if you have a Will, a Grant of Probate will not be required, which is certainly not the case. The need for a Grant is dependent upon the types of assets in the estate and the value of those assets.

Where there is any property owned solely by the deceased or where they own a specified share in a property (as tenants in common), then a Grant will always be required in order to sell or transfer that property/share of that property

Can you prove that you own your land?

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Can you prove that you own your land?

It may seem like a startling question: but how can you prove that you own your land? Bear in mind that under current legislation no sale, mortgage or other disposition of land can happen unless you can prove good title. Nowadays this is done by reference to the Land Registry, which keeps a record of title deeds and land ownership electronically. This is by far the easiest and most efficient way of proving land ownership.

But what if you just have title deeds? Is that not proof enough that you own your land?

Title deeds do prove ownership, but remember that they are very easily lost, damaged, incomplete or even destroyed. If that happens, it can be very expensive and time-consuming to replace them. And if someone dies and their executors cannot prove ownership of the land for them, it takes even longer and can draw out the already difficult administration process for their loved ones considerably.

Getting your land registered is a sensible way of proving good title for years to come, rather than leaving everything until it is too late. “First registration” of the land, while still alive, is cheaper and less demanding than proving good title after death. We see many estates here at SWW Trust Corporation which suffer significant delays and costs simply because the testator did not protect their ownership rights fully through registering their good title in lifetime.

Contact us about having your property registered: we offer a swift and friendly service for something which, though seemingly dull and easy to ignore, is of incredible importance to families. It is not just about protecting the economic value of your house: it is about protecting the happy family memories of your home.

 

James Greenwood-Reeves

Estate Case Manager

SWW Trust Corporation