Help please!

Miss_Merlot

Not sure if this is the right place to post this - please point me in the right direction if not!

My husband and are currently sitting down and planning ahead on finances / wills etc, as we are in the process of buying our first property.

He has a property (his mother's home) which is half in trust to him.

My question is, if husband were to pre-decease his mother, would the trust then pass to my as part of his estate, or would the trust "dissolve" as the sole named beneficiary is dead...?

atush

I would assume you would inherit it as his legal spouse (but would not if you weren't married).

but why is the house this way? He would still have to pay inheritance tax unless his mother pays him 50% market rent, plus now he will pay CGT on it (whereas he would not if it was inherited from his mum.

In addition if she is frail and might be in need of care soon, this could come under deprivation of assets. So they local authroity would act as if she still owned the entire home.

this is the pension board, so i'd go elsewhere to discuss this- perhaps the CAB or benefits board or the tax board.

jamesd

He should discuss this with the trustees and his mother, for it is probably not her or their intent that if you divorce him, you should get half of the property in a divorce settlement. A pre-nuptial agreement should probably be used to protect the intentions of the settlor of the trust (the person who put in the asset in the first place). It is possible that the trust would be protected from this outcome but it is more certain to make specific provision to ensure that the settlor gets the result they intend. Of course, since he's your husband, it's a bit late for pe-nups but it is worth having the discussion about intents and wishes.

What happens if he dies before you will depend on what the trust terms say. It might well not automatically pass to you but might instead be used to support any children and by discretion of the trustees be used to support you also. This is the sort of arrangement that can be used to protect the interests of children when life throws lemons their way. Things like death of one parent, remarriage, death of second parent, then person not biological parent giving preference to offspring from some other relationship, perhaps their biological children with whoever they marry next.

The trust might also be arranged in ways that could protect it if he becomes bankrupt, say as a result of an at fault accident or failure of a business he starts. Otherwise it might be possible to force sale of the house to liquidate the 50% interest in it to pay off his creditors in this sort of unpleasant situation.

In such cases it's very important to involve the settlor in part because it's likely that their estate has substantial additional value and much of it may end up not being inherited if they do not consider that their interests and intents are properly protected.

It's things like this that can make it really useful to get lawyers involved in planning.

xylophone

This might just have been a case where a parent has died leaving his share of the house to his child but where the surviving spouse has the right of residence?
http://www.thewillpractice.co.uk/property-trusts.html

There may well be a clause to cover the beneficiary pre- deceasing the surviving parent?