Alisdair Liddle weighs up whether or not buy-to-let properties are still worthy investments.

For many years, buy-to-let investments in the UK were a very attractive prospect. Rapidly rising house prices and good yields tempted a huge number of investors into the buy-to-let industry. However, in recent years, buy-to-let has become a little less attractive for individual investors due to higher stamp duty rates on second properties, the phasing out of certain tax relief schemes and other increased costs.

As a result, a lot of investors are looking for alternative ways to own and buy their rental properties. One alternative is to buy an investment property via a trust. A good choice for those who want to pass property onto their children or other beneficiaries, trusts can help you to make the most of your investment and set your loved ones up for big long-term financial benefit. How trusts are set up A trust is normally made up of at least three elements. The first is the settlor, sometimes called a trustor, grantor or donor. This is the person who first puts the asset into a trust. Second, a trust will have at least one trustee. This person will have control over the asset. Third, you have the beneficiary. As the name suggests, this is the person who is set to see the benefit of the trust. Buy-to-let property and trusts There are a number of reasons why you might want to hold your buy-to-let property in a trust. For the most part, buyers opt to use trusts as a way to minimise their tax liability and pass property onto family or friends while incurring minimal charges.

For example, if you set up a 'Bare Trust', HMRC ignores the trustee for tax purposes. Instead, it's the beneficiary whose position is taken into account during the buying and selling process. This means that, if the beneficiary isn't already a homeowner, purchase of the buy-to-let property won't incur the higher, second home stamp duty charges. For high-value properties, this can have a big impact on the final purchase cost.

What's more, HMRC treats the beneficiary as the owner of the property from the time it's put into a trust. This means that, if a parent purchased a property for their child and died shortly after, the money spent on the buy-to-let may not be liable for inheritance tax.

However, in recent years the Government has tightened up rules to prevent people using trusts to avoid inheritance tax, so you'll need to speak to a specialist advisor to find out what a trust would mean for your finances. Difficulties of purchasing a buy-to-let property as a trust One of the main downsides of purchasing a buy-to-let property as a trust is that it can be difficult for trusts to secure mortgages. If you need a loan to fund your purchase, a trust may not be your best option. However, if you plan to buy the property outright, this won't make any difference to your purchase.

Call our expert team on 01603 677077 to find out more.

This column is sponsored by Spire Solicitors.