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Question & Answer time

Monday February 2017

Q. I have some spare cash earning virtually no interest in the bank and I have decided that I would like to buy a flat for my daughter, who is currently just 16. Am I correct in thinking that she cannot own the property until she is 18? Is there an alternative for ownership? What are the tax implications surrounding this proposal?

A. You could consider using a bare trust for buying the flat. In very broad terms, a bare trust is a basic trust in which the beneficiary (in this case, your daughter) has the absolute right to the capital and assets within the trust, as well as the income generated from the assets. This type of trust is popular with parents and grandparents who wish to transfer assets to children or grandchildren. The assets are held in the name of a trustee (in this case, you), who will be responsible for managing the trust in a prudent manner so as to generate maximum benefit for the beneficiaries. However, you would not have control over the assets and no say or discretion in directing the trust’s income or capital. However, since you will have provided the funds to buy the flat, under what is known as the ‘settlements legislation’ you will be taxed on the income from it until your daughter becomes 18.

When your daughter turns 18, you can change the name of ownership on the Land Registry documents, which is relatively straight-forward.

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