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Can Property Left in Trust Be Sold?

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Selling a property in a trust is a complex process; however, when you understand the tax implications, steps involved in securing a sale and the pros and cons of different sale methods, the trustees can make an informed choice.

In this guide, we cover all of these topics and more, giving you real examples of trustees we’ve worked with.

Table of Contents

What Happens to Property Left in Trust in a Will?

When a property is left in trust through a will, the management and distribution of the property are governed by the terms outlined in the trust document. The level of control that trustees have over the property depends on the specific structure of the trust. Generally, upon the death of the person who created the will, the named trustees become responsible for managing the property according to the instructions provided in the will and the trust terms.

We remember a case in which a client, Mrs Johnson, came to us utterly confused about the property her late husband had left in trust. She wasn’t sure if she could sell it or how to go about the process. After carefully reviewing the trust document, we determined that, as a trustee, she had the authority to sell the property, provided she acted in the best interests of the beneficiaries. It was a relief for Mrs Johnson to finally have clarity on her situation.

Can a Trustee Sell Property Without the Beneficiaries' Approval?

One common question arises whether a trustee can sell a property without the beneficiaries’ consent. The answer depends on the powers granted to the trustee in the trust deed. In most cases, if the trust deed is silent on this matter, it is implied that the trustee has the authority to sell the property. However, it is always advisable for the trustee to consult with the beneficiaries and keep them informed about any decisions regarding the trust property.

In one instance, a trustee client of ours, Mr. Smith, was eager to sell a trust property to invest the proceeds in a promising business venture. However, the beneficiaries were adamant about keeping the property within the family. After some difficult conversations and negotiations, we found a middle ground where a portion of the property was sold, and the remaining share was distributed among the beneficiaries. It was a win-win situation that wouldn’t have been possible without open communication between the trustee and beneficiaries.

Tax Implications of Selling a Property Held in Trust

When selling a property held in trust, it’s crucial to consider the tax implications, including Inheritance Tax (IHT), Capital Gains Tax (CGT), and Stamp Duty Land Tax (SDLT).

can property left in a trust be sold
The current IHT threshold is £325,000, and any value above this amount is taxed at 40%.

Inheritance Tax (IHT)

Inheritance Tax may be payable on the value of the trust property upon the settlor’s death (the person who created the trust). The current IHT threshold is £325,000; any value above this amount is taxed at 40%. However, certain exemptions and reliefs may apply, such as the residence nil-rate band, which can increase the threshold to £500,000 for estates that include a main residence.

Capital Gains Tax (CGT)

When a trust property is sold, Capital Gains Tax may be payable on any profit made from the sale. The CGT rate for trusts is currently 20% for gains within the basic rate band and 28% for gains above the basic rate band. Trustees can claim the annual exempt amount, which is currently £6,150, to reduce the taxable gain.

We once had a client, a group of trustees, who were looking to sell a trust property that had appreciated significantly in value over the years. They were concerned about the potential CGT liability and how it would impact the beneficiaries. After carefully analysing their situation and considering various options, we asked them to consult their accountant on staggering the sale over two tax years, allowing them to utilize the annual exempt amount twice and minimise the overall CGT liability. It was a strategic move that saved the trust a substantial amount in taxes.

Stamp Duty Land Tax (SDLT)

If the trust property is sold, the buyer may be liable for Stamp Duty Land Tax. The rates and thresholds for SDLT vary depending on the value of the property and the buyer’s circumstances. For example, first-time buyers may be eligible for relief on properties valued up to £500,000.

The Process of Selling a Property Held in Trust

  1. Appoint a solicitor: The trustees should appoint a solicitor who specialises in trust law to guide them through the sale process and ensure that all legal requirements are met.
  2. Obtain a valuation: The trustees should obtain a professional valuation of the property to determine its current market value. This will help them set a realistic asking price and ensure that the property is not sold for less than its true worth.
  3. Prepare the property for sale: The trustees should ensure that the property is in good condition and ready for viewing. This may involve carrying out any necessary repairs or renovations.
  4. Market the property: The trustees can choose to sell the property through an estate agent, at auction, or to a professional property buyer like Property Saviour. Each method has its pros and cons, which we’ll discuss later.
  5. Complete the sale: Once a buyer has been found and the sale price agreed upon, the solicitor will handle the legal aspects of the transaction, including drafting the contract and transferring the funds.

 

The following table compares pros and cons of different methods of selling a property:

 

MethodProsCons
Estate Agent– Access to a wide pool of potential buyers
– Professional marketing and advertising
– Expertise in negotiating offers and handling the sale process
– Higher fees compared to other methods
– The sale process can be lengthy, often taking several months
– No guarantee of a sale, as buyers may pull out or renegotiate the price
Auction– Quick sale process, with completion usually occurring within 28 days
– Competitive bidding can lead to a higher sale price
– Increased certainty, as the winning bidder is legally obligated to complete the purchase
– Auction fees can be high, including entry fees and commission
– Limited control over the final sale price
– The property may not sell if the reserve price is not met
Property Saviour– Fast and hassle-free sale, with completion in as little as 7 days
– Guaranteed sale at an agreed price
– No fees to pay, as Property Saviour covers all legal costs up to £1,500
– Flexibility to complete the sale at a timescale that suits you
– The sale price may be lower than the open market value, as Property Saviour offers a quick and certain sale

Importance of Accurate Property Information Forms

When selling a property held in trust, it’s essential to provide accurate information on the TA6 and TA10 property information forms. As the executor may not have lived in the property, they risk being sued if they provide incorrect information, whether deliberately or unintentionally. This can be a daunting prospect for executors who are unfamiliar with the property’s history. However, when selling to a professional property buyer like Property Saviour, this isn’t an issue. We understand that executors may not have all the answers, and we’re willing to work with you to gather the necessary information. Our aim is to make the sale process as smooth and stress-free as possible so you can focus on moving forward.

We recall a case where an executor client, Mr. Brown, was selling a trust property that had been vacant for years. He was worried about completing the property information forms accurately, as he had limited knowledge of the property’s history. We assured him that, as a professional buyer, we were prepared to take on the property with any potential issues and that he wouldn’t be held liable for any inaccuracies in the forms. It was a huge weight off his shoulders, and he was able to proceed with the sale with confidence.

Why Choose Property Saviour?

If you’re considering selling a trust property and would like a quick, certain, and hassle-free sale, Property Saviour can help.

We specialise in buying properties in any condition and can complete the sale in as little as 7 days with no fees to pay. Contact us today to discuss your situation and receive a free, no-obligation cash offer.

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  • The price we’ll offer is the price that you will receive with no hidden deductions.
  • Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
  • These valuations or surveys result in delays and price reductions later on.
  • We are cash buyers.  There are no surveys.
  • We always provide proof of funds with every formal offer issued.
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