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Trust transactions

02 April 2013
Issue: 4396 / Categories: Forum & Feedback , Inheritance Tax , Trusts

The life tenant of an interest in possession trust would like to use some of the capital to purchase a residential property in which she could live. One of the remaindermen is a minor, but the other beneficiaries are happy to allow this. The tax implications of a capital withdrawal or property purchase are reviewed

My client in her mid-70s is the sole life tenant of an interest in possession trust established in 1939. In 2005 she executed a deed of appointment dividing the capital of the trust into three equal parts for the benefit of her two daughters and her grandson.

The trust owns 100% of a commercial property which produces income and 100% of the issued share capital of a property investment company that owned a similar commercial property producing much less income. The single property in the company has been sold for £1m; it cost £100 000 in 1985.

Our client wishes to extract the net proceeds to buy a main residence in London to be near her family. She will sell her existing home in the Midlands but needs more funds to move to London.

Although her two daughters and grandson are the eventual beneficiaries...

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