Lifetime Interest Trust

Fazzer
Fazzer Posts: 18 Forumite
edited 12 June 2012 at 2:37PM in Over 50s MoneySaving
Hi All,

After extensive searching without much luck I have decided to start a new thread for advice.

Surely the following situation must be as common as a rainy bank holiday but it seems to be a tedious job at the moment with noone we deal with knowing anything?

My mother died in February 2012 and we have been struggling with the estate ever since.

My father who is in his mid-80s asked ‘a solicitor’to set up a lifetime interest trust for mum’s side rather than inherit everything from mum.

A deed of variation was drawn up by the solicitor with the following affect.

Mum’s sole and joint liquid assets were named in the trust document (deed).

Mum’s 50% share of the matrimonial house (held as tenants in common) was also placed into the Lifetime interest Trust.

Dad will benefit from the interest / returns on money invested in the trust.

Dad has also put his share of the house into trust and the deeds have been registered in the names of the trustees (dad and my sister and I).

My main question is how do we, in practical terms, set up the Trust to manage the cash assets? The solicitors are useless unless you pay them £50 per syllable uttered.

The Bank seems to totally misunderstand what we are trying to do yet this must be a very common scenario?

What should we be asking for to put the cash a vehicle for onward investments (current account?).

If we want to invest money that has gone into the trust howdo we actually do this? For instance if we (the trustees) wanted to invest the trust funds in shares or bonds or anythine else what is the correct way to do this? In whos name is one quandary?

This aspect of Lifetime interest trust containing my mother’s liquid (cash) assets is becoming the bugbear.

Present situation pending some advice:#

Rightly or wrongly, it is done now, Dad cashed in most of mums joint and sole assets soon afterdeath (Feb 2012). The proceeds of which have been placed into a separate account in Dad’s name ‘earmarked’ to be transferred to the new Trust Account when we can getthe bank to set it up.

On request for a Trust Account, the Bank now wants to set us up a Business current account based on the Executors of the Will (Myself and My father. Not on the basisof the Trust which includes my sister as a named trustee (but she is not an Executor).

Why do they want to do this as I have no idea?

Surely we just need a current account in the names of the three trustees with at least two out of the three trustees signatures required? ie. as named on the Trust document (deed) not the Will? The current Bank account then acts as a repository to move the cash funds in and out of investments?

At the time of death the solicitor we approached said Probate was unnecessary. However, due to National Savings and Premium Bonds rules Probate now been required and applied for.

If anyone has experience of this type of situation and can shine some light on the practicalities of getting the bank to set up the correct account and also how in practical terms we (the trustees) physically and practically invest the Trusts cash assets I would be very grateful.

I thought I knew what we were doing at the start but everyone else seems to have different ideas.

Your comments would be very much appreciated.
«1

Comments

  • Savvy_Sue
    Savvy_Sue Posts: 45,799
    Name Dropper First Post First Anniversary
    Forumite
    Fazzer wrote: »
    On request for a Trust Account, the Bank now wants to set us up a Business current account based on the Executors of the Will (Myself and My father. Not on the basisof the Trust which includes my sister as a named trustee (but she is not an Executor).

    Why do they want to do this as I have no idea?

    Surely we just need a current account in the names of the three trustees with at least two out of the three trustees signatures required? ie. as named on the Trust document (deed) not the Will? The current Bank account then acts as a repository to move the cash funds in and out of investments?
    I can't comment on the rest, but actually, I'm not sure you're right about 'just' needing a current account. You're setting up a trust, which has a legal standing in its own right (and will require annual tax returns).

    Got to dash, hope someone else has been more helpful before I come back!
    Signature removed for peace of mind
  • Savvy_Sue
    Savvy_Sue Posts: 45,799
    Name Dropper First Post First Anniversary
    Forumite
    OK. In the absence of a more helpful response, I'm going to suggest that you get the Which books on Trusts, possibly available from your local library but do make sure you have the latest editions. And I think there may be more than one of them.

    Writing down your questions is always useful. Seeing if you can get answers from the books is also helpful, you can then check your understanding with the solicitor. And while it may cost money to get answers from the solicitor, I think you need to pursue this. If you are finding charges excessive or the service poor, then consider asking for the company's complaints policy.

    I'm still hoping someone who knows more than me will be along ...
    Signature removed for peace of mind
  • John_Pierpoint
    John_Pierpoint Posts: 8,390
    First Post First Anniversary
    Forumite
    I think you need to unpick in more detail exactly what it is that your father has done and put valuations on each asset, if you are to get a worthwhile response.

    When someone died intestate, the default rules tend to automatically create a life interest (aka interest in possession/fixed interest trust) for the surviving "partner".
    I have spent an adult life time as such a trustee following my father's untimely death when I was 21.

    How compos mentis is you old dad - does he understand what he has done ? I am a bit disturbed in that he seems to have made himself a beneficiary of the income from some of his own assets ? Or is it just his half of the house he has put into the trust?

    If you get a copy of the "Which?" book "Giving & Inheriting" (It has a blue cover with a stylised family tree on it. The previous version with a photograph is out of date as Gordon Brown clamped down on trusts.)

    If you read that with a wet towel round your head - you will be able to enter into a discussion with those few posters on here who understand trusts.

    Good luck.

    John
  • margaretclare
    margaretclare Posts: 10,789 Forumite
    If you read that with a wet towel round your head - you will be able to enter into a discussion with those few posters on here who understand trusts.

    Thank you for that, John. I must admit, I read post # 1 and although I think I'm an intelligent woman, I barely understood a word of it.

    This really is 'specialist' territory, isn't it, and unlikely to elicit much clarification from an internet forum like this one.
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • sebastianj
    sebastianj Posts: 1,039
    First Post First Anniversary Combo Breaker
    Forumite
    I think you should consult another solicitor.
    I think your dad was misguided, setting up this kind of trust is asking for trouble imo. It may help others who are making sinilar mistakes.
    sebastian
  • Savvy_Sue
    Savvy_Sue Posts: 45,799
    Name Dropper First Post First Anniversary
    Forumite
    sebastianj wrote: »
    I think you should consult another solicitor.
    I think your dad was misguided, setting up this kind of trust is asking for trouble imo. It may help others who are making sinilar mistakes.
    I did wonder, but hesitated to suggest it. I still think that becoming as well informed as possible and then writing out questions is useful.

    An alternative would be to consult an accountant. Whichever you go for, using a member of STEP would probably be wise.
    Signature removed for peace of mind
  • John_Pierpoint
    John_Pierpoint Posts: 8,390
    First Post First Anniversary
    Forumite
    Thank you for that, John. I must admit, I read post # 1 and although I think I'm an intelligent woman, I barely understood a word of it.

    This really is 'specialist' territory, isn't it, and unlikely to elicit much clarification from an internet forum like this one.

    Conceptually it is not that complicated and the interest in possession trust was very often used to protect the family wealth until the son-and-heir reached an age of sufficient maturity to take over.
    For example my great great great grandmother was running a 135 acre farm together with her teenage son and daughter - she almost certainly had a life interest trust. [The danger being that if she actually owned the freehold and remarried the farm would then have belonged to her new husband].

    However Gordon Brown convinced himself that trusts were the creatures of the wealthy and introduced a lot of new rules and regular scalping of the capital for IHT.

    The tax complexities and super tax rates that are charged, if the income is accumulated means that administering a trust tends to involve a professional, who in turn complains that it is not earning enough to pay his fees.

    Hence the desirability of the original poster learning how to administer the situation on a DIY basis - I managed to run a simple interest in possession trust for the benefit of a great aunt for about a weekend's work per year ( I had a co-trustee but that was really just a matter of putting forms in front of him and saying sign here.)
  • margaretclare
    margaretclare Posts: 10,789 Forumite
    If your great-great-great-grandmother was running the farm in the days before the Married Women's Property Acts 1881 (I think that's the correct year) and had remarried, the farm and all she owned, all she stood up in, would have belonged to her new husband. Not after that date.
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • John_Pierpoint
    John_Pierpoint Posts: 8,390
    First Post First Anniversary
    Forumite
    edited 14 June 2012 at 10:50AM
    Yes my ggg grandmother was running that family business in the 1830s.

    Many successful widows did so in the Georgian times - only in Victorian times did the desire to "be respectable" become so overriding [I suppose it is not that different from the "honour" problems today] Perhaps by then the state was getting a grip on the running of the country and "scandal" could be spread further than the people who actually knew you personally, by the new fanged postal system and newspapers.
    In the next generation a female got killed probably by the after effects of of becoming an unmarried mother - the 18 month old kid was fined 9% of her inheritance for the "sins" of her mother.

    However, through the 1800s the population virtually doubled every 50 years. The increase would have been even greater, but many people emigrated in search of a better way of life, to the United States and then in the British Dominions.

    Life was precarious, the only way for the individual to control the situation was to try a bit of praying, as they still do in China.

    The government hadn't a clue how to control the situation as witnessed by allowing a million citizens to starve in Ireland. Not that different from some African country today.

    Wikipedia explains the legal changes for women here; it took a couple of goes to get to something approaching modern rights and until the 1920s to sort out things like voting and adoption.:
    http://en.wikipedia.org/wiki/Married_Women%27s_Property_Act_1870
  • dzug1
    dzug1 Posts: 13,535
    First Post Combo Breaker
    Forumite
    Fazzer wrote: »

    On request for a Trust Account, the Bank now wants to set us up a Business current account based on the Executors of the Will (Myself and My father. Not on the basisof the Trust which includes my sister as a named trustee (but she is not an Executor).

    Why do they want to do this as I have no idea?

    Surely we just need a current account in the names of the three trustees with at least two out of the three trustees signatures required? ie. as named on the Trust document (deed) not the Will? The current Bank account then acts as a repository to move the cash funds in and out of investments?

    They want to do it because it is what is legally required - the trust counts as a business and as others have said will have to do its own tax return. Muddling it with the private affairs of the trustees is never a good idea.

    You will need to advise the Trustee Tax Office in Nottingham that the trust has been set up. The Probate document is all that is needed to prove its existence
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 341.6K Banking & Borrowing
  • 249.7K Reduce Debt & Boost Income
  • 449K Spending & Discounts
  • 233.5K Work, Benefits & Business
  • 605.8K Mortgages, Homes & Bills
  • 172.3K Life & Family
  • 246.5K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards