Putting A House In A Trust - Is It Worth It?

Definition Of A Trust

In the UK, a trust is a means of managing assets, such as cash, investments, land, or properties. There are several trust kinds, and each one is taxed differently.

Trusts involve:

  • The individual who places assets into a trust is known as the “settlor.”
  • The individual who oversees a trust is known as the “trustee.”
  • The “beneficiary” is the recipient of the trust’s benefits.

Trusts can be either revocable or irrevocable, depending on the settlor’s wishes. A revocable trust gives the settlor the ability to modify or terminate the trust at any time during their lifetime, while an irrevocable trust is a permanent arrangement. 

Trusts are commonly used to protect assets and provide for the transfer of wealth to future generations.

Purpose Of Putting A House Into A Trust

Putting a house into a trust is a great way to ensure that the house will remain in the family after the owner has passed away. It allows for the house to be managed and distributed according to the wishes of the owner, and it helps protect the house from probate and taxes. 

With a trust, the property owner can name a trustee to manage the house and its assets, and they can also name a beneficiary who will receive the house or its assets after the owner has passed away. A trust can also provide flexibility with regards to how the house will be used and how its assets will be distributed. 

Benefits Of Putting A House Into A Trust 

Some of the benefits of putting a house into a trust include:

1. Asset Protection: Putting a house into a trust can help protect it from creditors and other potential liabilities.

2. Avoiding Probate: Assets held in a trust are not subject to probate, which can be a lengthy and expensive process.

3. Tax Benefits: Trusts can offer tax benefits such as tax deferral and estate tax savings.

4. Flexibility: Trusts provide flexibility in terms of designating beneficiaries and managing assets.

5. Control: The trustee has complete control over the assets held in a trust, which can help ensure that they are used in accordance with the wishes of the grantor.

Drawbacks Of Putting A House Into A Trust 

There are some drawbacks associated with putting a house into a trust, and these need to be considered too:

1. Cost: the cost of setting up a trust can be expensive and could include legal and administrative fees.

2. Loss of control: when you put a house into a trust, you lose control of it and the trustees will manage it on behalf of the beneficiaries. 

4. Complexity: trusts can be complex and require ongoing management. 

5. Limited flexibility: trusts are legally binding documents so they can be difficult to change or alter once they are set up. 

6. Unforeseen circumstances: if the circumstances of the beneficiaries change, the trust may not be able to deal with those changes.

Steps For Putting A House Into A Trust 

1. Choose a trustee: This should be someone you trust to manage the trust, such as a family member or solicitor.

2. Create the trust deed: This is a legal document setting out the terms of the trust, such as who the beneficiaries are and what they will receive.

3. Transfer the property into the trust: This can be done by signing a transfer deed and registering it with the Land Registry.

4. Pay any associated costs: This may include legal fees, stamp duty, and registration fees.

5. Inform HMRC: Stamp Duty Land Tax may be payable, so you should inform HMRC of the transfer.

6. Complete the trust deed: This should include the trust’s objectives, the roles and responsibilities of the trustees, and how the trust can be terminated.

7. Appoint trustees: The trustees should be appointed in writing and their responsibilities set out in the trust deed.

8. Make sure the trust is properly administered: The trustees should ensure that the trust is administered according to its terms and that the beneficiaries receive their entitlements.

9. Keep records: The trustees should keep accurate records of all transactions and decisions made by the trust.

Final Thoughts

Whether or not you should put a house in a trust in the UK depends on your individual circumstances. Depending on the type of trust you set up, there may be legal and administrative costs.

It is important to consider the potential advantages and disadvantages of setting up a trust, such as the level of control you have over the house and the potential for tax savings. If you decide to put a house in a trust, it is important to seek legal advice and ensure that the trust is set up correctly.