Recently one of our client’s wanted to find out whether it was possible to use a trust to purchase a home for one of thier children who was over 18 in order to avoid the higher stamp duty band for a second home.
A “discretionary trust” which has, in the past, been the most common type of trust allows the trustees to be in control of the trust’s assets – they are able to decide when they are released. This type of trust is subject to a 3 per cent stamp duty surcharge when used to purchase a property.
It could be worth considering setting up a “lifetime interest trust” to make the purchase. This type of trust is not subject to the additional stamp duty charge just as long as the property is being purchased as the main residence.
For example, if the property is being bought for your daughter or son to live in one would not need to pay the extra stamp duty. The only scenario where this wouldn’t be the case would be if the daughter/son already owned another property and in this case the trust would be liable to pay the surcharge – unless the new property is being bought as a replacement main residence.
The downside is that while a “discretionary trrust” would allow a parent to keep control of whether their daughter or son could stay in the property with a lifetime interest structure – it means the son or daughter will retain a right to live there. The trust would therefore not be able to charge the daughter or son any rent to live at the property. However, if one wanted to charge rent only to cover maintenance then it would be possible to have this written into the trust agreement.