Family buyout (without title trf... for now). Declaration of trust

Hi all,

I purchased a property with my sister ten years ago and we recently purchased another house together (with her husband this time). The newer property is just for them, however I needed to be on the title and loan as we accessed equity from the first property.

We now wish to try to separate the properties so that I legally own the first property and my sister and her husband own the newer property. We know that stamp duty is payable for both properties but the problem is qualifying for the loans separately which doesn't work at the moment.

Could we transfer my sister's share of the first home to a bare trust (using a declaration of trust) and then change the beneficial ownership to me and pay the stamp duty, leaving the titles and loans as is for now. And do the same thing with the newer property, changing the beneficial ownership to them through a bare trust paying the stamp duty.

Would this work for making sure that land tax is no longer charged as both properties are our PPOR respectively? Eventually, we will sort out the loans properly and change the titles, and I'm assuming that given we already paid Stamp Duty, there won't be any due at that time.

Has anyone done this to separate property between family or friends?

Thanks in advance

 

You will need the permission of the mortgagee to declare trusts over security property.

A bare trust is one where A owns for B, with no discretion, so you would be changing legal title or beneficial ownership by declaring a bare trust. Duty would be triggered if beneficial ownership is changing.

Don't forget CGT,

 

Depending on the state the duty issue may still pose a problem. Unlikely the apparent purchaser concession would be recognised but may still be worth making enquiries as legal complexities can often address this favourably. OSR often accepts and stamps evidence of such issues (ie that ALL proceeds came from the other person and arising from a trustee beneficial interest rather than legal interest) - They often disregard bank loan proceeds but sometimes it can affect things. Better this is done now so a later transfer is not dutiable. A solicitor strong on that state duties would be recommended.