Readers forum: In trust

My client has a buy-to-let investment property with a loan-to-value ratio of 58%. The flat is valued at £450 000 with a mortgage of £262 000. He has decided to sell the flat because he cannot put a mortgaged property into a trust that is being set up for his two children aged 18 and 12. My client lived in the property for eight years before renting it out so I understand it would qualify for two reliefs: one for the period he lived in it and a letting relief up to £40 000. I estimate the proceeds from the property would be about £150 000 after all capital expenditure and costs of purchase and sale of the property.

His plan is to set up a vulnerable persons’ trust of £100 000 for his two children. The £100 000 will be used to make a cash purchase of...