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  • FIRST POST
    • sotonhill
    • By sotonhill 16th Sep 17, 10:32 AM
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    sotonhill
    House to be Held on Trust
    • #1
    • 16th Sep 17, 10:32 AM
    House to be Held on Trust 16th Sep 17 at 10:32 AM
    Hello,

    I would appreciate some advice on a property trust that appears to be set up by my late mothers will. She died last month and her estate passes to my brother and I in equal shares.

    However a clause in the will states that her house is to be held by the property trustees (defined as the Trustees of her will which is my brother and I) upon the following trusts

    “The Property Trustees shall permit the Occupant and his Fianc!e/Wife and Children to live in the property for the Trust Period paying rent monthly in advance to my said son SON B calculated at one third of the full open market rent assessed by agreement of the parties or in default by an independent surveyor appointed by the parties subject to the Occupant” ….

    The will then lists some obligations on the occupant such as keeping the property insured, paying all outgoings on the property, keeping it in good repair and that the Property Trustees shall not sell it without the Occupant's consent. (Unless he persistently and wilfully refused to meet his obligations as an Occupant or ceases to use the property as a main home.)

    The will defines the Occupant as my brother and the Trust Period as the period between my mother's death and the death of the Occupant.

    Although I am happy to apply for a grant of probate and complete the relevant IHT forms I am unsure of what needs to be done regarding the house to be held by the property trustees apart from agreeing a rent and the need to update Land Registry records.

    I intend to seek advice from a solicitor regarding the and also instruct them to handle the property accent but I would appreciate any advice from the forum so I am not completely clueless!

    Many thanks.
Page 1
    • getmore4less
    • By getmore4less 16th Sep 17, 12:42 PM
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    getmore4less
    • #2
    • 16th Sep 17, 12:42 PM
    • #2
    • 16th Sep 17, 12:42 PM
    Does the brother want to be living in the place or would a gift/buy out/sale/distribution adjustment be an option.

    Does he currently live there with his family?
    • sotonhill
    • By sotonhill 16th Sep 17, 12:53 PM
    • 3 Posts
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    sotonhill
    • #3
    • 16th Sep 17, 12:53 PM
    • #3
    • 16th Sep 17, 12:53 PM
    I should have stated that he currently lives there with his wife and wants to continue living there.
    I don't think he would be interested in a buyout.
    • getmore4less
    • By getmore4less 16th Sep 17, 1:19 PM
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    getmore4less
    • #4
    • 16th Sep 17, 1:19 PM
    • #4
    • 16th Sep 17, 1:19 PM
    In practice very similar to a live interest with the complications of rent and what happens if he dies before his family.

    The tax(IHT/CGT) situation needs consideration along with the income tax.

    If the brother not interested in simplification could you consider giving up the rent to simplify.

    A complete review of all options needed.
    • Yorkshireman99
    • By Yorkshireman99 16th Sep 17, 2:21 PM
    • 3,309 Posts
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    Yorkshireman99
    • #5
    • 16th Sep 17, 2:21 PM
    • #5
    • 16th Sep 17, 2:21 PM
    In practice very similar to a live interest with the complications of rent and what happens if he dies before his family.

    The tax(IHT/CGT) situation needs consideration along with the income tax.

    If the brother not interested in simplification could you consider giving up the rent to simplify.

    A complete review of all options needed.
    Originally posted by getmore4less
    The executors need professional advice as to how to safeguard the trust's interest in the property as far as insurance and access for regular inspection. What arrangements will be made for regular rent reviews? Likewise they need to be aware of their legal obligations as landlords and the IHT/CGT position. It sounds like a potential minefield and very one sided as far as paying only one third open market rent. A real can of worms.
    Last edited by Yorkshireman99; 17-09-2017 at 12:11 PM.
    • Keep pedalling
    • By Keep pedalling 16th Sep 17, 2:51 PM
    • 3,939 Posts
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    Keep pedalling
    • #6
    • 16th Sep 17, 2:51 PM
    • #6
    • 16th Sep 17, 2:51 PM
    Why do people lumber their children with such stupidly complex arrangements? Also seems a bit unfair that he does not have to pay the full rent for the 50% share either, not surprised he would be reluctant to buy that half out.
    • Mojisola
    • By Mojisola 16th Sep 17, 2:54 PM
    • 28,524 Posts
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    Mojisola
    • #7
    • 16th Sep 17, 2:54 PM
    • #7
    • 16th Sep 17, 2:54 PM
    The will defines the Occupant as my brother and the Trust Period as the period between my mother's death and the death of the Occupant.
    Originally posted by sotonhill
    So it's possible that you won't ever get the benefit of your inheritance?

    Did your brother have any influence over the way your mother's will was written?
    • dresdendave
    • By dresdendave 17th Sep 17, 12:06 PM
    • 657 Posts
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    dresdendave
    • #8
    • 17th Sep 17, 12:06 PM
    • #8
    • 17th Sep 17, 12:06 PM
    It sounds like a potential minefield and very one sided as far as paying only one third open market rent. A real can of worms.
    Originally posted by Yorkshireman99

    It's possible we are not getting the whole story, perhaps whilst living with his mother, the brother may have spent a lot of his own money maintaining and improving the property, which is now being rewarded by the below market rent.


    I agree with your comment about this being a potential minefield. A pity the mother didn't sit down with both her children and discuss the options rather than leaving them to sort out this mess now she has departed.
    • getmore4less
    • By getmore4less 17th Sep 17, 12:27 PM
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    getmore4less
    • #9
    • 17th Sep 17, 12:27 PM
    • #9
    • 17th Sep 17, 12:27 PM
    Third rent is probably about right as they(occupant 50% owner) are responsible for 100% of the maintenance.

    The alternative could be half market rent + share of the maintenance

    or potentially no share at all.
    Last edited by getmore4less; 17-09-2017 at 12:32 PM.
    • Yorkshireman99
    • By Yorkshireman99 17th Sep 17, 12:35 PM
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    Yorkshireman99
    Third rent is probably about right as they(occupant 50% owner) are responsible for 100% of the maintenance.

    The alternative could be half market rent + share of the maintenance

    or potentially no share at all.
    Originally posted by getmore4less
    Half the market rent plus 50% of the maintenance would be more equitable. Insurance of the struccture should be in joint names
    • getmore4less
    • By getmore4less 17th Sep 17, 2:04 PM
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    getmore4less
    Depends where you think they would come in at.

    Rental yield on property against average maintenance costs over a lifetime.

    6% gross yield I would happy to take that 1% cut to have no calls for cash back to deal with the property maintenance when they want to paint a room or a new boiler.

    I would be looking for no personal liabilities against a property in an interest in possession trust as a remainder man of that trust.
    • sotonhill
    • By sotonhill 17th Sep 17, 5:47 PM
    • 3 Posts
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    sotonhill
    Thank you all for your comments which have confirmed the need to seek professional advice and raised some questions to address.

    I hope I didn't appear unhappy about the proportion of rent, it certainly wasn't my intention. As has already been pointed out the maintenance and building insurance costs need to be allowed for. I also recognize that it was my mother's wish that my brother be able to live in the house for the rest of his life, if he so desires, and I don't believe he had any undue influence on the writing of the will.

    What was confusing me is the different types of trust and it appears I am going to be responsible for ensuring this is properly set up and taxes paid etc.

    And yes it would have been helpful if my mum and the solicitor who wrote this will had discussed the options with us or at least explained how they saw the will as it is working.
    • Yorkshireman99
    • By Yorkshireman99 17th Sep 17, 5:54 PM
    • 3,309 Posts
    • 2,662 Thanks
    Yorkshireman99
    Thank you all for your comments which have confirmed the need to seek professional advice and raised some questions to address.

    I hope I didn't appear unhappy about the proportion of rent, it certainly wasn't my intention. As has already been pointed out the maintenance and building insurance costs need to be allowed for. I also recognize that it was my mother's wish that my brother be able to live in the house for the rest of his life, if he so desires, and I don't believe he had any undue influence on the writing of the will.

    What was confusing me is the different types of trust and it appears I am going to be responsible for ensuring this is properly set up and taxes paid etc.

    And yes it would have been helpful if my mum and the solicitor who wrote this will had discussed the options with us or at least explained how they saw the will as it is working.
    Originally posted by sotonhill
    As you are both executors you are both responsible for the property. Your brother needs to understand that and not just leave it to you. He also needs to undersatnd his rights and responsibilities regarding the property. From past expereince you need to document every thing and make sure he gets copies of everything. That way if there is a dispute you can produce a full paper trail. Don't fall into the trap of thinking you can just let things go without keeping your eye on things.
  • Land Registry
    I'm guessing the change of ownership and how to protect the trust/beneficial ownership on the land register are issues already covered. But just in case not, and the property is in England or Wales here's some basic details.

    If the legal ownership has passed to the Property Trustees then it can be transferred by the executor(s), as named in the probate, to the beneficiaries. I'm guessing that's you and your brother transferring to the two if you by way of an Assent (AS1).

    How the trust is then protected, inc the brother's right to live there, is where the legal advice comes in. the details of the trust are not something we register so they will remain private to you/your solicitor as appropriate.

    I suspect you may look to register a Form A restriction which will indicate that a trust exists and restrict the surviving legal owner should one of you die. Understanding how it restricts is important as what happens to each of your shares in the beneficial ownership in the future/in your own wills/inheritance adds to the mix also

    Our Practice Guide 24 on Private Trusts offers some guidance from a registration perspective. The key though is the wider legal advice and you each knowing and understanding its impact in any given future set of circumstances.
    Last edited by Land Registry; 18-09-2017 at 6:07 AM.
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