Do I need to amend my Probate property valuations?

John_Pierpoint

silvermum wrote: »

John
Sorry - I meant that specific properties or items weren't directly left to named individuals e.g. the flat to me, and the house to my sis.

OK - here's what the will says:
MY TRUSTEES shall out of my ready money and the clear monies
to arise from the said sale calling in and conversion pay or provide for
my debts and funeral and testamentary expenses and all legacies
bequeathed by this my will or any codicil hereto and my Trustees
shall stand possessed of the residue of the monies and of the
property and investments for the time being representing the same
and of such parts of my said property and assets as shall for the time
being remain unsold and unconverted (hereinafter called 'my
residuary estate') UPON THE FOLLOWING TRUSTS:-

a) as to a one fifth share thereof for <MY LATE MOTHER>
absolutely PROVIDED THAT if the said <MY LATE MOTHER>shall have
predeceased me then my Trustees shall hold this part of my residuary
estate UPON TRUST for <Grandchild 1> of <Address> and <Grandchild 2> if and when they attain the age of 21 years and if more than one in equal shares absolutely
b) as to a one fifth share thereof for the said <Grandchild 1> absolutely
c) as to a one fifth share thereof for the said <Sister’s name> absolutely
d) as to the a one fifth share thereof for the said <MY NAME> absolutely
e) as to the remaining one fifth share to <Grandchild 2> absolutely

7. DURING THE MINORITY of any beneficiary that may have a
vested or contingent share in my estate any part of the capital or
income (or of both capital and income) of the vested or contingent
share of such infant beneficiary may be applied for the maintenance
education advancement or benefit of such infant beneficiary in the
absolute discretion of my Trustees who may in their absolute
discretion either so apply the same themselves or pay the same to
any parent or guardian of such infant beneficiary to be applied in
manner aforesaid and in such case the receipt of the person to whom
payment is so made shall be a sufficient discharge to my Trustees

You have forgotten the date, so when was this will signed ?

The bit of the will here seems to say:
Pay for my funeral, my debts and then any specific legacies in this will or any future codicil.
(a) With what is left take 20% to look after my widow if she is still alive
[seems a bit small but did they own lots of stuff as joint tenants?]
If/ when the widow dies then hold the 20% for the grandchildren X & Y .
(b) 20% for grandchild (a)
(c) 20% for my child (x)
(d) 20% for my child (y)
(e) 20% for grandchild (b)
[presumably this is all wrapped round with statements such as "being alive at my death else...."]

Then comes the instructions on how to deal with beneficiaries who are not yet adults.

In my opinion the 60% of this estate was intended to be held as an accumulation and maintenance trust, designed to bring up and educate the minors. There used to be special tax advantages for this sort of trust provided the beneficiaries got paid out before their 25th birthday. These privileges were largely removed in 2006. [Hence my asking for the date of the will, in an attempt to understand why it is constructed the way it is] The solicitor is probably correct in saying that the A&N trust is now taxed as a discretionary trust but without the flexibility possible for a discretionary trust, which at can be created to last up to 125 years but is subject to a stiff tax regime..
As each beneficiary becomes absolutely entitled to their share on reaching their majority, I think I would try to claim this is simply a bare trust A trust of convenience to give full ability to invest the funds for a child, not yet able to sign some documents themselves. Though as the beneficiaries are not "bereaved" disposals of its assets will be liable to CGT at the full 28% rate and with only one nil rate band equal to only half of that available to one individual.

http://www.amazon.co.uk/Giving-Inheriting-Which-Essential-Guides/dp/1844901181

http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM1567.htm
[You can dodge about all over the HMRC staff manual following the links and Googling for more but I would read the Which? book first. You will need a clear weekend and a cold towel to wrap round your head]

I can see two problems in the future:

1. Surely a "minor" becomes an adult on their 18th birth day..
http://en.wikipedia.org/wiki/Minor_%28law%29

I am not sure which of these is the more important for a parent to prepare to handle:
"Daddy I got drunk on my 18th birthday and had unprotected sex."
or
"Daddy, you know all this money I inherited on my 18th birthday; well I have bought a ton-up motorbike to celebrate".

I don't subscribe to the ignorance is bliss school of thought.

2. Is Auntie thinking of using the second property to earn a living with "holiday lettings" ?

The trustees are expected to manage the trust assets as would "prudent men of business" and take professional advice as to their decisions.

One of the pieces of advice will need to be "Can we wangle the capital gain on the deceased's home through as 20% belonging to three mini trusts (as stated in the will) or is it two one for each grandchild or perhaps just one bigger A&M trust for 60% of the gain.

And you could look into "determining" the death value of the home at the same time.
.

John_Pierpoint

madbadrob wrote: »

That will is specific. The properties are to be sold and then converted into money. Therefore unless a deed of variation is taken out the sister cannot buy the house unless she has the money to do so first. The deed of variation would need to be taken out saying that the house is given to the sister so long as she pays to the estate x amount of money. The x being the difference between the value of the house and her share

Rob

You cannot break the trust because the beneficiaries are minors and so cannot agree to be dispossessed.

"Hi Auntie you know its my 18th birthday today, well here is a writ for the misappropriation of my inheritance".

Unfortunately in this era of "funny money" the distinction between income and capital has become distinctly fuzzy and the children may well find they have been dispossessed by the politicians printing extra money, while creating a situation where the existing capital yields next to nothing.

silvermum

John_Pierpoint wrote: »

You cannot break the trust because the beneficiaries are minors and so cannot agree to be dispossessed.

"Hi Auntie you know its my 18th birthday today, well here is a writ for the misappropriation of my inheritance".

Thanks for all the replies.

Can you explain what you mean by the above?
When I originally discussed the will with the solicitor he indicated that it would be possible for my sister to have the house by a Deed of Variation and a charge on the property (payable back to me, not the children) to make up the difference between sis's inheritance and the value of the property (it won't quite be enough).

Are you saying you don't think it will be possible? Surely the minors are not being 'dispossessed' but receiving their share in cash which then can be invested?

silvermum

The will was from 2003 by the way.

And 'Auntie' is planning to move into the house she wants, not let it, as she is currently in rental property.

madbadrob

I take John's point however I disagree with what he is saying. The trust would not be broken by a deed of variation. The minors have no say in this has you are right they are under 18. In this case the trustee's of the trust will act as if they are the minors and they make the decision has to whether the house can be sold. The money from the sale then goes into the trust fund.

John's second point was just being hypothetical but one that could happen. However it wouldnt be the aunt they would be taking legal action against but the trustee's of the trusts that were created.

Silver are you saying that the shortfall your sister would have in value of the house and her share you would stand and that you would then have her pay you back as a small loan would be? If so then I see no problems with that at all. So long as the childrens shares are placed into trust asap and therefore can be invested or whatever the trustee's decide to do for the benefit of the children.

Who are the trustee's to be? Will the executors take this on?

If your sister is in agreement with this idea then you need to speak to the trustee's and make sure they agree and if so I would have the solicitors go ahead with a deed of variation

Rob

silvermum

Rob - thanks for that.

Regarding the trustees, it's a bit of a mess really, as both Sis and I are the trustees!

This is causing some problems over agreeing the 'value' of the house she wants. She obviously is trying to agree the lowest possible value for her benefit, but this is in conflict with her role as a trustee in acting in the best interests for the (child) beneficiaries. And I am caught in the middle - trying to negotiate what can be reasonably justified as a fair 'value' whilst taking a 'hit' on my immediate share of the inheritance to bail out Sis with the charge on the property.
Aaargh! :eek:

Savvy_Sue

silvermum wrote: »

Rob - thanks for that.

Regarding the trustees, it's a bit of a mess really, as both Sis and I are the trustees!

This is causing some problems over agreeing the 'value' of the house she wants. She obviously is trying to agree the lowest possible value for her benefit, but this is in conflict with her role as a trustee in acting in the best interests for the (child) beneficiaries. And I am caught in the middle - trying to negotiate what can be reasonably justified as a fair 'value' whilst taking a 'hit' on my immediate share of the inheritance to bail out Sis with the charge on the property.
Aaargh! :eek:

This is the point at which I might suggest to her that unless she is prepared to accept an average of the professional valuations you have had from estate agents, then she and you should each separately take (and pay for) professional advice. Hopefully such professional advice would make it clear to her that whatever else happens, the children's trust cannot be disadvantaged in any way ...

If it's been a while since a valuation was given, you could even get another one carried out. Obviously an estate agent will do this for free, but you can appoint someone and pay for a valuation for probate (or any other purpose!)

Because if you can't get to grips with your mutual conflict of interest and your mutual duty to act in the best of interests of the grandchildren, you might even need to appoint professional trustees for the children's trust.

If you generally have a good relationship with her, would she accept such a suggestion over a friendly cup of tea?

silvermum

Sue
No - Sis and I not on brilliant terms. She is still bearing a grudge as she thought she was going to be left the house outright, and she has made it clear she thinks the inheritance left to the children is preposterous.

She has no money/savings of her own to pay legal fees and huge emotional attachment to the house, so hence why I have tried to be accommodating and explore ways to help her have it. I sought legal advice and was told that it would be perfectly acceptable/defensible to discount the 'value' of the property by an amount equal to the costs of selling it, so including legal/estate agent/ clearance fees, as well as the cost of it potentially not selling for a period of time. However I fully believe that £5000 is a reasonable sum to cover those, and yet Sis continues to push for more.

Of course we could resort to handling it all over to a solicitor to administer, but not only would we probably end up spending more than the sums under debate, but Sis and I would likely end up estranged at the end of it.
Hence why I'm trying to reach a sensible, legal conclusion.

madbadrob

Sue,

You have said totally everything I was going to say. There is a definite conflict of interest here and I would be suggesting now legal advice and possibly having the trust administered by someone who is not involved in this at all. With the conflict of interest there is no way the trust can be administered correctly. Also with the bad blood between you both being trustees could inflate that. For example child 1 goes to Aunt and says I want 1000 pounds for something and she agrees yet you as a parent do not then you have another fight on your hands.

I think we as lay people have now reached a point where our views and knowledge is no longer enough

Rob

silvermum

Thank you for your views and thoughts.

I don't see why I shouldn't continue as a trustee, but I agree that my sister has a conflict of interests. Separate to this, I have a concern about her being a trustee at all because she has shown no interest in the children since they were born - no communications/ birthday cards/ telephone calls etc. How she is suddenly expected to be 50% responsible for investing significant sums of money on their behalf, I have no idea, but that is a separate issue I want to address later.

At the moment it seems as if my 'reward' for having all the hassle of administering the estate is to be the one who comes out least well off in all this, with a lower cash share of the inheritance, and money tied up in a house I have no interest in until god knows when...