Trustee ownership of a beneficiary’s home

Trusts were originally devised as a means of holding land and protecting it from the hazards of medieval landownership, and may still serve a similar purpose today. Indeed, land is still seen as an attractive, or at least suitable, investment for trustees. Perhaps the most usual property investment held by trustees is a house or flat for a beneficiary to live in. Provided the house is the beneficiary’s main residence, there may be some tax advantage in this arrangement. Since Capital Gains Tax (CGT) was first introduced, the CGT Private Residence Exemption has been available for a gain arising from the disposal of dwelling house held in the trust, which is occupied by a beneficiary as his only or main residence. Now, there can be a Stamp Duty Land Tax (SDLT) advantage in trustees purchasing a house to be occupied as a beneficiary’s principal residence. A house held in trust, but occupied by a beneficiary, may also form the basis for the new ‘Residence Nil-Rate Band’ (RNRB) being claimed when calculating Inheritance Tax (IHT) on the beneficiary’s death after 5 April 2017.