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Bare trust?

Knowledge a little rusty

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Afternoon all. I have a situation as follows: Property held on trust for 2 named minor children in the 90s. The children provided the funds to purchase the property (originating from non-parental sources). Deed states that children can transfer their vested interest in the property to themselves at the age of 25 - which they did. Parents were the trustees.

The above all sounds like a bare trust to me - albeit the children could have called for the property to be transferred to them at age 18 (Saunders v Vautier?) - but could it be any other type of trust?

The property is about to be sold, so just trying to establish what questions to ask. Many thanks in advance.

 

Replies (13)

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By ireallyshouldknowthisbut
26th Jan 2022 17:24

I don't think its bare if there is an age restriction, the property would be the children's on reaching 18. Bare mean they have all the rights and obligations of ownership, but someone else holds the legal title.

There is a trust deed, so that is where you start.

Thanks (1)
Scooby
By gainsborough
26th Jan 2022 17:34

Thanks Ireally.... I always thought that a bare trust could specify an older age but that per case law the children could insist on it coming to them at 18 (especially as the children in this case provided the funds to purchase the property)?

The trust deed states that the trustees hold the property but with the children having a vested interest until the age of 25 when the property could then be transferred to them.

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Replying to gainsborough:
By ireallyshouldknowthisbut
26th Jan 2022 17:37

Pass! I have a lawyer friend i ask about this sort of thing, but I thought if there was restrictions then it wont be bare.

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Replying to ireallyshouldknowthisbut:
Scooby
By gainsborough
26th Jan 2022 17:51

Many thanks for your responses :). The age limit is what first caused me to have doubts too but HMRC's Trusts Manual does have an example (1) of a higher age being specified https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-... and have also seen this on a few legal sites.

Any other comments from lawyer or trust accountant AWebbers much appreciated!

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By More unearned luck
26th Jan 2022 20:18

The facts are confusing. What does 'provide the funds' mean? Can minor children create trusts? Can they make loans to trusts? Have they added funds to someone else's trust? Can they do that? Who made the deed you mention? What property was settled by it? How has the trust's income been taxed over it's life?

It sounds very much not like a bare trust until the beneficiaries became absolutely entitled (for half the fund when the elder became 25 and for the other half when the younger reached 25 possibly and assuming they take in equal shares).

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Replying to More unearned luck:
By SteveHa
27th Jan 2022 08:43

It sounds like a settlor interested trust to me, if the children bought the property into the trust that they are absolutely beneficially entitled to.

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By Tax Dragon
27th Jan 2022 07:29

Pass on this one - as has been said, need to see the deed. But as MUL says, surely the question of the nature of the trust has arisen before now?

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Replying to Tax Dragon:
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By Tax Dragon
27th Jan 2022 07:32

On the 25th birthdays, for starters. (Crowe v Appleby issue.) And before that re income.

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paddle steamer
By DJKL
27th Jan 2022 08:02

How do the property titles describe who has title(may be pre land registry, certainly would be in Scotland)?

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Scooby
By gainsborough
27th Jan 2022 09:21

Thanks very much for your help all. I will go back to the client for further info but in the meantime:
- Property was purchased by the children using their own funds.
- As they were minors at the time, the title was held by their parents as trustees.
- The deed states income to be held in trust for the children and that the children have a vested interest in the property.
- This vested interest could be transferred to them on them reaching the age of 25.

The issue of the trust hadn't come up before now as the property was transferred to the children around 15 years ago and before I started acting.

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Replying to gainsborough:
paddle steamer
By DJKL
27th Jan 2022 10:37

How rentals were treated for income tax (assuming property was rented out to A n Other) might be worth considering, also what happened to the cash that accumulated is worth considering?

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Replying to gainsborough:
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By More unearned luck
27th Jan 2022 12:08

You still haven't said who made the deed. How come that person/those persons had the right (or thought that they had the right) to delay the children being absolutely entitled?

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Replying to More unearned luck:
Scooby
By gainsborough
27th Jan 2022 18:26

Ah apologies MUL...it was the parents who made the deed.

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