# Buying a house in the UK with funds from a US trust



## ptikobj (Jul 15, 2018)

Hi everyone

My wife and I are first-time house buyers in the UK. My wife has dual British-US citizenship and has a trust fund based in the US that her family set up for her to help with things like buying her first home.

According to my in-laws who set up the trust, the funds in the trust have already been taxed, so if we lived in the US then there'd be no further tax to pay on the funds coming out of the trust. But, since we live in the UK, I'm not 100% sure what the tax implications are. Would we pay tax to the UK government, even though there is a US-UK tax reciprocity agreement in place? Who could we speak to about this (any recommendations would be enormously helpful).

I don't even know where to begin with this so any advice on where to start or what to consider would be helpful too.

Thanks, and look forward to reading your responses.


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## 255 (Sep 8, 2018)

@ptikobj -- Your situation can be complicated. You'll need a bit more information to process your situation. First, from the U.S. side, is this a revocable or irrevocable trust? In my experience most "trust funds" are irrevocable. (You should secure a copy of the trust.) Basically, this means they have to file separate tax returns and pay tax on any capital gains, dividends or any other income from investments that accrue to the fund (over $600.) This is the trustees responsibility -- who is the trustee? It would be very unusual to just park cash in a fund and not invest it. Also on the U.S. side, distributions are taxed on any "gains" that were distributed, but not on any principal, that your in-laws contributed to the fund.

It's even more complicated on the UK side. You may or may not owe any tax, partly based on your world-wide income. You might want to peruse this Government site: Trusts and taxes . A pdf, I gleaned from a "Google" search might be useful: https://www.blickrothenberg.com/app...t-beneficiaries-need-to-know-about-UK-tax.pdf . Do a Google search and you'll find plenty of tax articles/UK Tax Attorneys that could provide guidance (for a fee.) Cheers, 255


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## ptikobj (Jul 15, 2018)

Hi @255, thanks for the info. The trust is an irrevocable trust, and my in-laws are the trustees. They have ensured that all the taxes on the trust have been paid, and have kept us informed about the investments in the trust. However, it's not the type of trust we could simply draw from at will - we have to request that the money be paid out for specific purchases, such as buying a house, which is what we're currently looking at doing. But from what I understand, the money wouldn't be paid over to us; it would be paid directly from the sale of assets (e.g., stocks and other investments) in the trust over to the bank in the case of a mortgage deposit. So, my question about UK tax is that as the money isn't being transferred directly to us, would we still owe UK tax on it as we're technically benefitting from it, but not receiving any of the funds directly? Would that contribute to our income or would it be the same as if somebody else paid our mortgage deposit for us?

Thanks as well for the useful link, I'll take some time to search online - I did already reach out to one or two US/UK tax specialists and wow! They charge a fortune just to look at your documents, let alone advise on anything. So, the more we can find out before having to pay thousands of pounds for professional advice, the better!


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## 255 (Sep 8, 2018)

@ptikobj -- I am not an attorney, but generally, if the house is titled in your name(s,) there is a constructive distribution to you, as beneficiaries, even if you didn't touch the money. So you may owe or may not owe taxes. If, instead the trust takes title to the property (or another entity owned by the trust,) the property would just be another investment by the trust -- so no taxable event to you. Cheers, 255


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