As you may already be aware, HMRC introduced new criteria for when a Trust needs to be registered on the TRS. For more information on this please see ‘Changes to HMRC’s Trust Registration Services’. Were you aware that a Bare Trust may have been created in respect of the Property.
You should already be aware that all Express Trust’s unless exempt need to be registered on the TRS (For a full list of exempt trusts look at the TRSM23000 – https://www.gov.uk/hmrc-internal-manuals/trust-registration-service-manual/trsm23000.) This includes when a Bare Trust has been created where the Legal Owner* and Beneficial Owner* of a Property are different.
Consider the below flow chart when deciding whether a Property Trust exists.
Say we have Husband (Peter) and Wife (Julie) and the both own a property together as Tenants in Common.
Peter dies and in his Will he leaves his half share of the property in a discretionary trust to Julie, their children and their remoter issue.
The executors of Peter’s Will are Julie and Peter’s brother Douglas and they are also appointed to be the Trustees of the Will Trust.
As a result of the Will Trust there are two Trusts that need to be registered:
|Will Trust||Property Trust|
Trustees: Julie and Douglas
Beneficiaries: Julie, Peter and Julies children and their remoter issue.
|Settlor: Peter and Julie|
Trustees: Julie and the Trustees of the Will Trust
Beneficiaries: Julie and the Beneficiaries of the Will Trust.
What about the 2 year exemption for trusts created on death?
If we consider the above example again, there is an exemption which means that a trust created on death does not have to be registered until 2 years from the date of death. So, if we consider Peter’s date of death to be the 29 June 2022, the Will Trust will need to be registered on the 29 June 2024.
However, this exemption does not apply to the Property Trust, because for the 2 year exemption to apply all of the assets in the Trust need to have come from the property comprised from the estate on death. So in the above scenario, this will be property solely, from Peter’s estate. As we can see in the above example the Property Trust is comprised of both Peter’s estate and Julie’s estate. This effectively means that there are only 90 days to register the Property Trust which, in this example, would bring us to 27 September 2022.
*The Legal owner is the person/ people who own the legal title of the property.
*The Beneficial owner is the person/ people who are entitled to the benefits of the property.