A client is selling a property which has recently been discovered is held in a (statutory) trust (pre March 2006) and wants to know CGT / IHT implications. Alhtough I know the basics of trusts I'm aware it's a very complex field so just want to check I'm thinking along the right lines, or nudged in the right direction ;)
In sumary, father died, no will, property (was all in his name) put in trust for the 3 children and mother has a right to live in it during her lifetime. The house is to be sold for a more suitable accommodation for the mother who is now elderly. Cost £200k, Current Value £500k, so gain £300k
It seems the trust is split in two halves - one half being Mum & Child 1, the other half being child 1+2+3. I'm told ownership is the 3 siblings only. Mum and Child 1 to purchase new property together with proceeds (Child 2 + 3 have agreed to gift their share over - can they make any future claim against them?)
CGT - PPR? Does the whole gain qualify for PPR as the widow is living in the property? Initially I thought so, but now I'm not so sure.
IHT - no trust adminsitration has been done, as only recently discovered it existed. Initially I thought that as mother may be a beneficiary of the trust (but not owner) and has lived in it, maybe it isn't an issue as she's considered to have an interest in posession. But am doubting myself - should 10 year charges have been paid? Are there the two nrbs for mother and father?
Finally, if new property purchased in child 1 name only, then it would be a gift from mother to child 1 with the 7 year rule coming into play.
With Trusts, I'm never sure if I'm over complicating things, or simplyfying things too much! So any helpful advice is much appreciated to get me looking in the right areas.