Buying a Property in Trust for our son – Land Transaction Return Form

Thanks Paul and DP1 for 2 great posts.

Paul you mention "Estate Trusts" and here is the first layer of obfuscation that the wealth planning industry uses, it seems to make up names as it goes along. As far as I can tell from the gov.uk website, there are only 7 types of trusts, none of which are called Estate Trusts: https://www.gov.uk/trusts-taxes/types-of-trust

- bare trusts
- interest in possession trusts
- discretionary trusts
- accumulation trusts
- mixed trusts
- settlor-interested trusts
- non-resident trusts

The 2nd layer of obfuscation is the "mystical" process for setting up a trust which is rarely shared. However a will can say: "I leave my estate in trust for..." and as far as I'm aware, that's all that's required to create a trust at the point of death. There's no secret sauce required. Now what I haven't quite figured out, is what's required to differentiate between the different type of trust that statement creates, I'm assuming a bare trust.

If you're really into asset protection DP1, have you looked at getting a 2nd citizenship and hence 2nd passport? Gotta be pretty loaded for that mind and probably risking straying into evasion rather than avoidance.

Perhaps the answer to all this is the plan a mate of mine has to become a Permanent Tourist! He plans to have 5ish properties around the world and constantly travel, not spending more than 3 months (or whatever the appropriate country specific rules are) to not be resident for tax purposes anywhere!

Or perhaps that can be combined with another wheeze I discovered recently of spending 9+ months aboard cruise ships, and only coming "home" for holidays and special events. Apparently that's a real thing that some retired people do. Think of all the wealthy silver haired potential investors you'd meet! Hoho.

Reply to the comment left by "Colin McNulty" at "28/03/2017 - 10:29":

Thanks Colin,

As I understand a Will isn't really a legally binding document and can be picked apart. I'm not of a legal background but have seen this several times. Perhaps someone who knows what they are talking about can elaborate on this point. A Deed is the instrument that does the job people expect of a Will.

What benefit(s) does a second citizenship have? Legal ones obviously. Where does evasion come in?

Just to add another unsubstantiated tip to the mix, if someone were selling up their portfolio and moving to a country that also had CGT then the way to do it would be to move to Narnia first for a long holiday - which has no CGT or tax on foreign income) do the selling at the point you are out of the UK tax net (professional advise required on the details here. Then move from Narnia to your retirement country so that you can honestly answer the question,

"Did you dispose of any chargeable assets in the last 12 months"

With a "No" since everything as disposed of before you fell under the new country's tax system.

Maybe you're right about will trusts, I'm no expert as we've established! 🙂 Either way, I only have one wife and one little person to inherit whatever I leave behind, so any will of mine is unlikely to be challenged.

I'm not expert in 2nd citizenships either, but AIUI you can open bank accounts, own property etc and travel, on your 2nd passport, so any country's authorities you may wish to evade would have a tough time tracing you. Also, where there have been requests from your original country to Narnia for a disclosure of bank account details of their nationals *cough* Switzerland *cough*, bank accounts opened in a 2nd citizenship would not get caught by such a request. And there's your tax evasion, I believe.

Evening Colin and Dp1

The "Estate Trust" I referred to was not a legal term or product, it was merely a way for me to differentiate between the Trusts intended for use after my wife and my demise and the Trusts used for purchasing property for my boys.

The three proposed in the Wills (excuse me if I use the wrong technical term) are a Discretionary Trust, a Life Interest Trust, and a Flexible Discretionary Trust.

Regards IHT, Tax avoidance, dual nationalities, & moving to Narnia etc. To be fair, I am resigned to the fact that I (our estate) will have to pay whatever tax is due at the time. All I'm trying to do is pay the legal but minimum tax that I need to. I want to sleep well at night and at home which is wherever my whole family are. If that means more tax, then so be it.

I will insure against my IHT bill now (joint policy payable on second death) for say the next 10 or 20 years, and then review the whole process again at whatever tax rates are applicable. If I do depart before then (hopefully not), then I believe I've done the best I can do. I could have kept researching everything to minute detail but by then would have talked myself out of doing anything!

Very good Paul, that seems a sensible and measured approach.

Just for the record, I'm not advocating tax evasion for a second and agree that all due taxes should be paid. It's instructive to discuss what is legal tax avoidance (e.g. pension contributions, ISAs, trusts etc), and what is illegal tax evasion (secret offshore bank accounts), so we can understand where the line is drawn, in order to stay on the "sleep well at night" side of it. 🙂

I also agree that it's our moral, ethical and fiduciary duty to our loved ones and descendants, to saddle them with the smallest tax bill legally possible. As Lord James Avon Clyde (one of the most senior British judges of his time) said in Ayrshire Pullman Motor Services v Inland Revenue [1929]:

> "No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue."

Clever man that Lord Clyde, and I agree with him wholeheartedly. I will pay every penny of tax that I'm due to, and I expect HMRC to push as hard as they can to maximise that tax take, just as I will push back as hard as I can.

E.g. I've just booked a call with my accountant to ensure that I make full use of the new Personal Savings Allowance before the end of the tax year. A perfectly legitimate new tax break that should save me and the Missus £200 each in tax. See Your Property Network magazine Dec 2015 (issue 90) page 50 for the Stephen Faye article on how to do this.