No tax for trust fund?

  • Thread starter ISTHISALOOPE
  • Start date
I

ISTHISALOOPE

Guest
Heres a scenario I've heard about and was wondering if its true.

A trust fund buys a property from the owner, keeps it for say two or three years and then gives it back to the owner.
So the owner gains getting a lump sum now.
Now lets say the trust fund was set up by a parent, ie the child owns the property which the fund purchased.
Then is it true that the child would have used none of thier CAT allowance so if the parent wanted they could still give the €478,155 allowance?
I know the fund would have stamp duty but thats a lot less than 20% cat. If this is true it seems like a handy way for high worth individuals to give money to thier children with minimum tax.
 
I don't understand your scheme, but I would doubt very much if it works.

Trust funds have a limited use in Ireland because of anti-avoidance measures. They tend to be used for timing disposals e.g. to do with agricultural farm relief.

It's a very specialist area and I am not aware of any off the peg scheme for minimising tax.

Brendan
 
Just to clarify - as with any legitimate tax avoidance measure if a transaction is artificially set up purely to avoid tax and might not reasonably be set up otherwise then Revenue can veto it under their anti-avoidance legislation. It's commonly assumed that avoidance is always proper while evasion is not. However in some cases even avoidance can be deemed improper.
 
Please lets not get into a debate about avoidance/evasion and see if anyone is knowledgeable enough to answer the original post. Thank You.

To simplify the question can a trust fund give an asset to someone without any tax liability for that person? (assuming the trust fund is controlled by a parent).
I realise this is fairly complicated tax law but lets examine the scenario.
 
"Please lets not get into a debate about avoidance/evasion and see if anyone is knowledgeable enough to answer the original post. Thank You."

This is a very rude comment. This is a voluntary board - it is not a tax expert board where punters are entitled as of right to seek detailed tax advice.

mf
 
And besides - the point about artificial avoidance is not necessarily irrelevant and was not mentioned simply for the purposes of debate. And mf1 has a point about your rudeness hardly being conducive to encouraging others to help you out. :rolleyes:
 
I suppose theres no hope in keeping MF in the above post on the subject or subjective for that matter.
We'll just have to proceed as normal without such petty comments and stick to the thread and the websites idea of asking about money. Enough said on that.
 
Lots of wealthy people do as follows;

Set up a trust fund for little Tommy. Put 100k into the fund. The proceeds are to be given to Tommy when he is 18.

The trust then purchases a property for 1million with a 900k mortgage.

The trust rents out the property, the rent pays the mortgage, and when Tommy reaches 18, under the terms of the trust, Tommy receives the property from the trust.

At this stage, Tommy is deemed for CAT purposes of only having a 100k from a class 'a' benefactor.

In short it does work, but needs to be set up carefully.
 
ISTHISALOOPE said:
I suppose theres no hope in keeping MF in the above post on the subject or subjective for that matter.
We'll just have to proceed as normal without such petty comments and stick to the thread and the websites idea of asking about money. Enough said on that.
Click to expand...
Well done. Because YOU couldn't stick to the topic in hand without making sarky comments about others you are now banned. :rolleyes:
 
Hi SPF

Why would they not just give Little Tommy the 100k directly, let him borrow the money and buy the house?

What does the trust add to this except extra paperwork and extra tax? Or are you using the word "trust" in a loose sense?

Brendan
 
Assume that Tommy is a child.

If I give him the 100k today all he will get is 100k, and a reduction of 100k in his group 'a' threshold.

If I set up a trust for Tommy with a term of the trust being that Tommy will get all of the trust property when he is 18 then the following occurs:

Tommy will get a benefit far in excess of the 100k when he reaches the age of 18. This benefit will comprise: the 100k that went into the fund, plus the equity accumulated in the property over the term of the mortgage, plus any accumulated profit from rents.

The only detriment to Tommy at this stage will be a 100k reduction in his group 'a' threshold.
 
You must log in or register to reply here.
Back
Top