Help with leaving house in trust before marriage

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I know this is a question for a legal professional but was interested whether anyone had any similar experience.

I’m getting married in October this year, we have 3 children together and own a property jointly together. I also have a property from before we met that I would like to ensure goes solely to our children in the (hopefully very unlikely) event anything goes wrong. Is there a way I can gift/put the property in trust for our children before we get married so it isn’t a marital asset? My OH is completely on board with this and wants it to be the children’s too so no issues there.

Thanks

I assume the additional property is a buy-to-let, in which case it is fairly straightforward to put it in trust. If you use the property yourself or want to continue to use the income, it is more complex. You need to see a solicitor to discuss your options before you get married.

That is for your response. It was my home for many years but yes, it is now rented out. There is a small income from it after mortgage, insurances and agent fees are paid. But that could also be put away for the children if it made the process easier.

Agree with the previous poster that you need to see a solicitor to discuss your options. A pre-nuptial agreement may be an option, for example.

If it has a mortgage on then there is likely to be some administration to do with the mortgage - the bank may or may not allow the change of ownership.

If the value (net, as long as the mortgage liability is assumed by the trustees) is in excess of £325k then there will be immediate inheritance tax due.

@AlliwantforChristmasisgu I don’t think so. Inheritance tax will only be due if the OP dies within 7 years of gifting her property to her children?

If you give the property to your children you may have to pay Capital Gains Tax.

@pantjog a direct gift to children (a Potentially Exempt Transfer) is different to a gift into trust (a Chargeable Lifetime Transfer).

This link gives a bit of detail.

I was answering the trust point but I see that the OP may be thinking about a direct gift too.

www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/gifting-and-inheritance-tax?utm_source=legacyurls&utm_medium=301&utm_campaign=/knowledge-literature/knowledge-library/gifting-and-inheritance-tax/

@AlliwantforChristmasisgu seems like the bottom line is that the OP needs professional advice. Looks like a minefield.

Once you marry any previous will becomes void so you need to make whatever provision you have in mind after your wedding.

Not necessarily. If the will is made in contemplation of marriage, it will remain in force after the wedding. In essence this means the will must contain a clause stating that OP expects to marry a named individual and that the marriage will not revoke the will.

You can make a will in anticipation of marriage which states this is for your children.
You can have a pre nup too.

In England if you are under 18 I believe you cannot own a property outright and would need trustees. Eg I know one man whose wife was sadly dying of cancer and she put her half of all their assets into trust for the children with her sister and mother as trustee (as he thought the father might not use the money for school fees which was her wish!). He was incredibly nice about it all and went along with it at a very sad time.

It would be best to take legal advice here (and in a few very rare divorce cases - very rich, trusts off shore etc sometimes the courts will break trust assets to give the lower earner spouse more but not usually I believe).

As someone said above if the property has risent in value there might be capital gains tax to pay (and if it has a mortgage on it which I am assuming not, stamp duty). Once is it in a bare trust for the children I think a trust is subject to relatively new taxes on trusts. When we put son 1's house in the name of his student but adult sibling to get him on the property market there were no tax issues as (a) it had not risen in value since purchase so no CGT and (b) no mortgage so no stamp duty and (c) said child was over 18 so property did not have to be in a trust at all so could be a straight gift. As I probably won' die for 20 years after the gift inheritance tax also not likely to be relevant.

However this does mean that this asset and the income from it will not be for the benefit of the mother and she might need that money later on so much be very sure she won't need access to it later.

The tax can be clawed back at any time if there's evidence it was done to avoid paying it

Lday with UK inheritance tax because the Uk has no lifeitme gift taxes uyou can give eg £`100m away when you are 49 to your children to reduce or avoid lawfully IHT and it cannot be clawed back. The 7 year rule is absolute. If you live 7 years even if you gave the £100m solely to avoid IHT it is not subjecr to IHT when you die. It is similar to husband and wife could each work part time at £10k a year deliberately instead of one of them so that each benefits from the personal tax allowance - or they eac h pay into an ISA, that is perfectly lawful tax avoidance.

When you put something in trust you lose all control over it and who would you trust to be a trustee?

The sensible route is via your will.

It isn't clear if OP is concerned about death or divorce, but her desire that the house does not become a marital asset suggests divorce is her bigger concern. A will would deal with what happens if she dies, a pre-nuptial agreement would deal with divorce.

Not so.

The entire point of giving things away is to avoid paying inheritance tax on it! HMRC has clear rules on the taper in tax due over the 7 year period.

Possibly you are confused with deprivation of capital rules for care home fees? Or something else? Definitely not inheritance tax though.