Query on a will clause

stickybun9

My Mum in Law died in April and left a will leaving her estate "UPON TRUST for my Husband during his life and then UPON Trust for all my children living at the death of the survivor of me and my Husband if both then in equal shares absolutely"

So, as I understand it, my Husband (and his Sister) will inherit when my Father in Law passes away.

MY FIL, my husband and his sister are trustees and beneficiaries.

My query is, if he chose to do so, could my Father in Law pass over MIL's estate (which is all cash, no property) whilst he still lives, to my Husband and his Sister who are the beneficiaries ? I think he would be willing.

There's a clause in the Will which states " My Trustees being at least two in number may at any time during the life of my Husband raise or pay to my Husband for his own absolute use or benefit the whole or any part of the capital of the Fund of which he is the life tenant".

Does FIL have to keep it until his death ? Sorry, this seems a bit of a gruesome question but of course, there's history and family circumstances, which I won't go into, but would explain why we don't really want to wait until FIL dies to receive my Husband's inheritance. FIL isn't my husband's Dad.

Any help would be appreciated.

Hawkeye4aneye

As MIL died less than 2 years ago then a Deed of Variation could be completed with your FIL your husband and his sister completing this so that the funds are split between all 3 parties.

A solicitor would normally be able to sort this out. Be careful the type chosen and one with STEP credentials would be preferable.

The other way of sorting this would be breaking the Trust and this would normally need a Solicitor as well.

stickybun9

Thanks for your reply, Hawkeye4aneye. So there's no way he could simply decide to pass the money over now, without resorting to amending the will, either by Deed of Variation or breaking the Trust? The reason I ask, is that the inheritance comes from my husband's father's pension and so FIL has said it should rightfully go to my husband and his sister. It just seems pointless having to wait until he dies.

Though he looked after my MIL financially, because their's was a second marriage, he kept his property and his money in his sole name so that it could go to his children and my MIL had the pension from her first husband (my husband's dad) which would go to her children.

I wondered whether that last clause in the will would give him "permission" to do with it as he wishes, i.e. pass it over now ?

I'd be glad of your thoughts.

dzug1

He can't pass it over - it's not his to pass. He can assent to it being passed - a DoV is the simplest way of doing this. The trustees could also wind up the trust - though that could be more open to challenge.

Willman_Rodders

A 'life interest' trust can include the power to 'advance capital' i.e. the trustees can release a part of the trust fund's capital (as opposed to the trust's income - which goes to the life tenant anyway) to the life tenant. The wording of the original trust will determine if the power is / is not included.

By releasing capital from the trust fund reduces pro-rata the capital remaining in the trust fund - which then means that the ultimate beneficiaries of the trust fund - in this case the OP's mother's children will receive less at the time the trust is terminated than they would otherwise have received. Also, income from the remaining trust fund may reduce immediately - with an impact for the life tenant. There could be other implications/consequences too; Local Hero has posted on this site some very informative articles about long term care - and how to protect assets from being used to fund care. Tax, and inheritance tax in particular, also need to be considered. The trustees need to consider their obligations and duties carefully.

The decision to release monies from a trust fund [where the power to do is granted] is made by the trustees of the trust fund. The life tenant may be able to ask the trustees to give consideration to such action. The life tenant then becomes the absolute owner of the monies released; he/she can choose to do whatever he/she likes with the released monies - the trustees have no say whatsoever.

Reading the extracted clause Stickbun9 posted suggests that the trust included in her MIL's will may be a trust allowing the release of capital from the trust fund. Assuming this is the case then monies could be released to FIL by MIL's trustees, and then FIL could, if he wanted, give those monies to his son and daughter. For clarification Stickybun9 should seek professional guidance.

localhero

stickybun9 wrote:

My Mum in Law died in April and left a will leaving her estate "UPON TRUST for my Husband during his life and then UPON Trust for all my children living at the death of the survivor of me and my Husband if both then in equal shares absolutely"

So, as I understand it, my Husband (and his Sister) will inherit when my Father in Law passes away.

MY FIL, my husband and his sister are trustees and beneficiaries.

My query is, if he chose to do so, could my Father in Law pass over MIL's estate (which is all cash, no property) whilst he still lives, to my Husband and his Sister who are the beneficiaries ? I think he would be willing.

There's a clause in the Will which states " My Trustees being at least two in number may at any time during the life of my Husband raise or pay to my Husband for his own absolute use or benefit the whole or any part of the capital of the Fund of which he is the life tenant".

Does FIL have to keep it until his death ? Sorry, this seems a bit of a gruesome question but of course, there's history and family circumstances, which I won't go into, but would explain why we don't really want to wait until FIL dies to receive my Husband's inheritance. FIL isn't my husband's Dad.

Any help would be appreciated.

The starting point is to have a read through of the Will as it may allow the trustees to end the life interest early and appoint some or all of the capital to the ultimate beneficiaries (ie your husband and his sister).

Since the Will allows the trustees to appoint capital to the father in law, it may also be flexible enough for them to terminate his interest as well.

Otherwise other options remain. A Deed of variation is potentially expensive and so is `breaking the trust`.

Your father in law can quite simply relinquish his life interest if he so wishes, but for it to be watertight will involve him signing a deed and paying a professional.

I agree that he should take proper advice as aside from the legal issues, there are some tax issues to consider.

For inheritance tax purposes, the value of the trust fund will be added back into the value of his estate if he were to die within 7 years with the trustees legally obliged to settle the tax bill.

Also, the assets gifted will be considered a `deemed disposal` for capital gains tax purposes - so could be relevant depending what assets are contained in the trust fund.

Find a member of a STEP who will be qualified to advise you properly as there are plenty of pitfalls for the unwary.

stickybun9

Thank you all for your replies. Gosh, it gives us a lot to think about and this is more complicated than I had hoped. Having read through the Will, I don't think that there is an option for the trustees to end the life interest early.

I think, as a couple of you have suggested, we will have to take some professional advice.

This is such a shame because I don't think that my MIL would have wanted us to have these problems and I personally feel that her solicitors didn't really give her good advice or explain to her exactly what her will would entail.

Thanks again for all your advice, it's appreciated.