Named bequest sold before death?

vigman

Apologies if this is in the wrong area, please advise if it should be moved
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Widower Mr Smith owns three properties. One, Rose Cottage, is his main residence. He has gone into care and something has to be sold to pay for this.

His main residence, Rose Cottage, is named in his will as being left equally to his grandchildren Bill, Fred and Mary.

The other two properties are named as going one each to John and Sandra his son and daughter.

If the main residence sells for 600K and only 200K has been spent on his care at the time of his death, does the balance of 400K still automatically go to the grandchildren? (Am I right in thinking that up to 7 years after this gift there would be death duties to pay on each gift?)

If "No", what could be done before the main residence is sold to ensure that the three grandchildren get the balance of the sale of the property after care fees are met?

Could the house be 'gifted' now to the three grandchildren with the proviso that they pay equally for his care until his death?

Another complication as these actions have to be carried out by his Power of Attorney, daughter Sandra as Mr Smith now has dementia and cannot write another will.

This is basically the situation we are facing at the moment and any advice would be greatly welcomed, please?

TIA

Vigman

peachyprice

I didn't think his home needed to be sold before death for care home fees, I thought they put a charge against it to be settled after death?

NAR

It depends on the exact wording in the will in relation to Rose Cottage and also balance of estate. If Rose Cottage is sold to pay care home then rest of money would be a balance of estate I would have thought, unless specifically stated otherwise in the will.

However I agree with what peachyprice has said above. Can his will not be explained to the care home and ask them to seek payment by way of a charge on Rose Cottage.

Mojisola

vigman wrote: »

Widower Mr Smith owns three properties. One, Rose Cottage, is his main residence. He has gone into care and something has to be sold to pay for this.

His main residence, Rose Cottage, is named in his will as being left equally to his grandchildren Bill, Fred and Mary.

The other two properties are named as going one each to John and Sandra his son and daughter.

It's for this reason that leaving specific properties to specific people isn't wise.

If one property needs to be sold, who is going to decide which one? Whichever one is sold is no longer able to be left in the will so that gift fails.

Is there a clause in the will that says who is going to inherit the residue? If there is money left from the house sale by the time he dies, that will be distributed according to that clause.

Does a property need to be sold? Are the other properties rented out and bringing in money each month?

If all his pension income and benefits and any rents are added up, does that cover the care home fees?

ValHaller

Sandra is in a situation of Conflict of Interest, in that as holder of the POA, she can take actions which prejudice the grandchildren's inheritance and protect her own interests. I don't see that she can rightly sell Rose Cottage without also acting to protect the inheritance of the grandchildren.

I think that the care home fees should come equally off the equity of all of his properties

Tuesday_Tenor

This gentleman seems to have a lot of capital. I wonder why it isn't working to earn him an income to cover his care home fees. Are there no rents from the two other properties, and can his main residence also be rented out?

A few suggestions to consider:

1) >>>> If the main residence sells for 600K and only 200K has been spent on his care at the time of his death, does the balance of 400K still automatically go to the grandchildren? No, what would happen automatically is that the 400K would go into his 'residual estate' which would be dealt with as instructed in the will. However, one form of intervention that might be possible (after death, while executing the will) would be a Deed of Variation. If all the beneficiaries who would be effected (i.e. the residual beneficiaries in this case) are in agreement then then the 'residue' could be distributed differently to the terms of the will, with the £400K (or whatever) going to the grandchildren. Look up Deed of Variation. You ask whether anything can be done now, and I guess the beneficiaries could in theory write some form of 'statutory declaration' that they intend to make such a Deed of Variation when the will comes to be administered. I doubt whether this would be enforcable if anyone changes their mind; you'd have to to check with a solicitor.

2) If anyone is living in a property rent-free then that situation could/should be reviewed pronto.

3) >>>> Could the house be 'gifted' now to the three grandchildren with the proviso that they pay equally for his care until his death?
Do you mean the house itself, or do you mean the proceeds of the house sale? If the former then why would a change of ownership be of greater benefit than just renting it out now and using that income for care home fees? If the latter, I wonder if it would be possible to set up some sort of Trust Fund with the proceeds of the house sale. The Purpose of the Trust Fund would be to pay the care home fees and it would be set up such that, after the death of Mr. Smith, any residual funds should pass tto the 3 grandchildren. It's just an idea ; I know nothing about Trust Funds; you'd have to talk to a solicitor.

A good point has been made re Sandra's conflict of interest.

Hope you can arrive at a good solution.

jackyann

I think this needs legal advice, but before that I would seek advice from:
AgeUK
The Office of the Public Guardian
The Probate Office (though I am not sure if they can offer hypothetical advice)
I would get current property valuations as well.

I would also get John & Sandra (and if they are of an appropriate age) the grandchildren to dicuss their views on how things should go.

It may then be appropriate to seek a deed of variation after death, so that the spirit of the bequest was honoured.

dzug1

peachyprice wrote: »

I didn't think his home needed to be sold before death for care home fees, I thought they put a charge against it to be settled after death?

That's when the Local Authority is paying his fees.

I don't think care homes are bound by the same rules for self funding residents

Errata

ValHaller wrote: »

Sandra is in a situation of Conflict of Interest, in that as holder of the POA, she can take actions which prejudice the grandchildren's inheritance and protect her own interests. I don't see that she can rightly sell Rose Cottage without also acting to protect the inheritance of the grandchildren.

I think that the care home fees should come equally off the equity of all of his properties

As his Attorney, Sandra has a duty to do whatever needs to be done to meet the best interests of Mr Smith. If that means selling Rose Cottage then it has to be done. Care homes won't put a charge on the property; if Sandra as his Attorney can't pay his fees by way of cashing in his assets, they will ask her to find him alternative accommodation.

vigman

Thank you so much to everyone who has replied so far!

Mr Smith's current properties and pension do not provide the 700 GBP (minimum) per week that are needed to pay the care home fees.

The 'easiest' property to sell, is surely the now empty Rose Cottage, and as his primary residence should not attract Capital Gains Tax (as would selling one of the other 2 properties??)

There is conflict in the family and a Deed of Variation now, or after death, would be impossible to agree on.

Equally, the rental of Rose Cottage is out of the question due to conflicts.

So, if Rose Cottage was now sold, and for example, 200K was held for care home fees and 133K given to each of the 3 grandchildren now (in Mr Smith's lifetime), what would be the immediate and future tax situation for the grandchildren?

[In actual fact, the real situation is incredibly complicated with only a few involved knowing all the facts. Also Mr Smith's own financial advisers and legal advisers are themselves very old and not on top of the situation, so clarification of certain facts are very difficult.]

All comments greatly welcomed

TIA

Vigman

Mojisola

Errata wrote: »

As his Attorney, Sandra has a duty to do whatever needs to be done to meet the best interests of Mr Smith. If that means selling Rose Cottage then it has to be done.

But by selling Rose Cottage rather than one of the other properties, she could be accused of trying to protect her own inheritance and thus misusing the POA.

Care homes won't put a charge on the property; if Sandra as his Attorney can't pay his fees by way of cashing in his assets, they will ask her to find him alternative accommodation.

My father is going to be self-funding but he is benefitting from the 12 week disregard at the moment and, after that, the LA will put a charge on the property until it is sold when they will recoup their money.