Do I need to amend my Probate property valuations?

madbadrob

silvermum wrote: »

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...

There is no reason you shouldn't continue as trustee or as executor my point was to have someone independent involved would take away any future complications.

With regards your sister being a trustee I would say your reasons for not wanting her as a trustee is actually a very good reason why she should be. Has a trustee you can legally remove money from the trusts. It would be therefore possible for you to remove money at any time and if you had a fall out with your child or children they could take you to court citing mis-management. Having your sister or a second person to counter sign and agree with you would give you a defence. I am not saying this would happen but I have heard of this occurring.

Your final paragraph really takes me back to what I said in the beginning and that you should tell her to get a loan or mortgage for the property or sell it on the open market. Her share would be enough to buy her something anyway. If she is working and for the small amount she would need I cannot see a bank or loan company turning her down as she would have the house as collateral

Rob

John_Pierpoint

silvermum wrote: »

Thanks for all the replies.

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.

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?

madbadrob wrote: »

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

Savvy_Sue wrote: »

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?

We have a problem here, possibly caused by a typically incompetent solicitor. (I am assuming your father's will was written by a solicitor):

Why did grandfather create a will leaving the majority of the family wealth to his baby grandchildren?. We don;'t know, we cannot know because he is not here to tell us.

Did he decide to jump a generation, because he thought his own children (or their partners) were a bit "flaky", or because the trust he created got good tax treatment and avoided current and future IHT CGT & income tax.?

Perhaps he was motivated by a bit of both possibilities?

Then that stealth tax socialist called Gordon Brown decided that dispossessing some of these potential "remittance men" trusterfarians of some of their tax advantages in 2006. Then in 2007 in a moment of panic, Gordon made a bid for the bereavement vote by introducing the transferable nil rate band.

Did the solicitor get in touch and say: "That will you made in 2003 is no longer as tax saving as it used to be - you might want to consider changing your will ?".

Well thousands of solicitors appear not to have done so and lots of these now somewhat outdated wills are being presented for probate. The authorities are taking a somewhat laid back attitude to beneficiaries and executors dodging round the obligations imposed by the trusts created.

http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeconaf/204/6051703.htm

However I cannot see how a instrument of variation can dispossess the rights of minors, furthermore the duty of a trustee to the beneficiaries of a trust ALWAYS trumps their own personal interests, there cannot be a conflict of interest.
[In reality we now have funny money, where the politicians can double the money supply and thus halve its capital value - similarly trustees can steal from the future by "borrowing" money from the trust and paying it back with devalued pounds]

If the trustee known as "Auntie" wants to take possession of the holiday home, she needs to buy out her sibling and her niece's and nephew's trust or pay them a market rent for their share of the property.

The only warning I would give is: What you really have now following the changes of 2006 is a discretionary trust, with very little discretion, designed to come to an end in a few years when the teenagers take control.
Someone has to administer this trust pay any income and CGT taxes and then reclaim the income taxes on behalf of the children. If the trustees cannot do this on a DIY basis they are likely to find that professional charges eat up most of the income and even make inroads into the capital.

I believe it is possible to invest in "life insurance bonds" and cash-in up to 5% a year. The withdrawn money counting as capital not income; thus avoiding the pantomime of paying 45% income tax only for the beneficiaries to claim it back again on their own personal annual tax returns. You might want to start another thread in due course called "managing the grand children's trust fund", possibly posting it on the "tax saving" part of this forum, to see if there are other trustees available to offer advice.

John,

PS Do you think there might be a third reason for grandfather creating the will he did:
I am going to bring my children together, like it or not, by making them both responsible for bringing up my grandchildren?
Perhaps the two grandchildren should do the administrative work - playing real life monopoly for half a dozen years might make them reasonably sensible at the age of majority ?

silvermum

John_Pierpoint wrote: »

Why did grandfather create a will leaving the majority of the family wealth to his baby grandchildren?. We don;'t know, we cannot know because he is not here to tell us.

Did he decide to jump a generation, because he thought his own children (or their partners) were a bit "flaky", or because the trust he created got good tax treatment and avoided current and future IHT CGT & income tax.?

Perhaps he was motivated by a bit of both possibilities?

We don't know, but if it's any help, here's my view as to why he did this, based on conversations I had with my father and events over the years.

I think he decided to 'jump a generation' because:
a) at the time the trust he created probably got good tax treatment
b) the grandchildren were his pride and joy and he genuinely wanted to give them every best chance in the future
c) He probably felt I didn't need his cash - I have worked in a good job for many years and am financially OK, married & settled
d) He probably felt that he had already given Sis more than her fair share of cash over her life, and didn't want to give her any more.
(Sis lived virtually rent free in the property she wants many years ago, and is still storing a lot of her belongings there. My father continued to pay all the bills for the house right up to his death, although it was empty and virtually unused for many years).

I doubt very much the trust was a ploy to bring us together - more likely just that there wasn't anyone else, as we are such a small family!

madbadrob

John,

The trust cannot be changed you are correct but that is not what the deed of variation is about as I assume you are believing. The will states that the house should be sold and that the money the children are to get goes into trust until they reach the age of majority. The deed of variation would only be to allow the sister to remain in the property and to forgo her share of the money in lieu of the property.

Personally I would forget the variation and sell the house from under her as the will states.

Rob

John_Pierpoint

Sure the trustees can do almost anything (in the best interests of the grandchildren) but as they are not seeing eye to eye over the treatment of the assets and there are only two executor/trustees (?) we have a deadlock ?

[Executors are automatically trustees of the assets of the estate, this creates slightly confusing situations where a single executor signs a form like this one to tell himself of the income he has given himself and now needs to (perhaps) reclaim or pay extra tax. If these two cannot agree to split up the estate into its three distinct bequests/settlements they could find themselves having fun with the tax authorities.]
https://www.gov.uk/trusts-taxes/trustees-tax-responsibilities
http://www.hmrc.gov.uk/pdfs/r185_ei.pdf

Personally I had to stagger on for years in a situation where the executors were united (sort of) but rental assets were involved. The protected tenants and their families were only prepared to offer peanuts to buy, in place of their peppercorn rents, so we ended up waiting for tenants to die (or hopefully go bankrupt "living death").]

Obviously there is a legal way out but enforcing it would cost a serious amount of money.

Perhaps, as you suggested, a third trustee is required. Preferably someone cheap but reliable, perhaps a retired businessman, preferably disinterested enough to say "bygones are bygones, we are where we are; now lets find a modus operandi and sort this out according to law".

Sad though it is, I think it is looking like a clean break from "renting" sibling may be the only answer, having a legal charge or a mortgage against the second property will only be a source of further friction, as (probably) the value of the property will get out of line with the value of the "loan" of part of it.

[Unofficially I had a situation a bit like this with my two children (they and we agreed that the sensible use of the inheritance was to purchase each of them a modest cheap subletable property in the university towns of their choice.- turned out to be the best short term investment of "family" money ever made and a "maturing" task and responsibility for both of them)]

silvermum

John_Pierpoint wrote: »

Sad though it is, I think it is looking like a clean break from "renting" sibling may be the only answer, having a legal charge or a mortgage against the second property will only be a source of further friction, as (probably) the value of the property will get out of line with the value of the "loan" of part of it.

Can you explain why you call her 'renting sibling' please? Would it not be possible to transfer the deeds of the property into her name?
Could there not be a return on the charge linked to the rise in value of the property e.g. if the charge is worth 10% at the beginning it is then worth 10% of the the value when sold?

silvermum

John_Pierpoint wrote: »

[Unofficially I had a situation a bit like this with my two children (they and we agreed that the sensible use of the inheritance was to purchase each of them a modest cheap subletable property in the university towns of their choice.- turned out to be the best short term investment of "family" money ever made and a "maturing" task and responsibility for both of them)]

This is one option I was thinking about for the children, but I suspect the need to have diversification in the trust fund would prevent this...

John_Pierpoint

By the time the kids are at uni the trust will be liquidating itself - buying a small property with "let-able rooms" is probably a safer bet than a ton up motorbike.
The fly in the ointment is that since the 1990s we have to think of the sort of money available to prime-minister's wives ar the turn of the century, in order to get something re-sellable.
The other points to watch out for are regulations introduced to "control" such freedoms: HIMO, Habitable rooms and fire regs, Gas safe, Local Authority planning controls to restrict areas for student letting ...........etc.
Mind you perhaps a "gap year" spent doing up something bought "Homes under the hammer" style in the university town might produce a student with practical skills, advanced knowledge of the local scene and a chance to consider if they were really heading for the right degree and career.

http://www.dailymail.co.uk/news/article-2160181/Cherie-Blair-Euan-Blair-investigated-claims-breached-planning-rules-sub-letting-basement-1-3m-Marylebone-home.html

John_Pierpoint

silvermum wrote: »

Can you explain why you call her 'renting sibling' please? Would it not be possible to transfer the deeds of the property into her name?
Could there not be a return on the charge linked to the rise in value of the property e.g. if the charge is worth 10% at the beginning it is then worth 10% of the the value when sold?

I think the charge probably has to be for a sum of money like a mortgage or referring to a legal dispute, perhaps resolved by an agreement in a deed in a solicitor's safe, otherwise it would be some sort tenants in common joint/shared ownership. Still feels possibly pregnant with potential future legal dispute and charges.
Even as gifted rent free there would still be growing resentment if the value of the house went up and no sympathy about the growing possibility of Capital Gains Tax/InHeritnce Tax at some distant time in the future. Very few people love a banker, somehow paying to rent the use of someone's money or someone's property is resented, even when the contract is purely commercial. There is a thread on here somewhere that almost amounts to: How to defraud the party with a legal charge on my property ............all I did was.........

I have a feeling that what is really being asked for is an Interest in Possession (ie a life interest) in the part of property that your sibling claims to be unable to buy. Depending on her net worth at the date of her death there could be a saving in CGT/IHT.

There is probably a whole new career in trust administration to anyone managing to successfully complete this soft of legal/taxation course.
http://www.cltint.com/attachments/Admin-of-Trusts-Replacement-Module-15.pdf

Actually as a result of reading the above, I have gone back and corrected one of my previous postings:

Discretionary and A and M trusts

All these trusts in all their forms are liable to tax at the
trustees’ higher rate (see section 9 below).
Trustees must account for tax to the HMRC and any distributions of
income must have the higher rate tax vouched via the system of the tax pool(see section 7.3 below).

I will expect you to be able to explain the tax pool by next weekend.:D
.

madbadrob

John are you not complicating an issue that is complicated enough as it is? Forget what the future holds and start with the present. The question is what to do with the house. The will is clear the house is to be sold and the money then distributed as stated. The executors have no choice but to sell it.

The sister who is also an executor could get a secured loan for the shottfall of her inheritance to buy the house outright from the estate and then the issues you are complicating it with wouldnt arise. If she wont or cant get a loan then I would sell the house as per the will instructions and let her with her share of the inheritance rent or buy a property elsewhere.

I appreciate that you are offering advice built on different scenario's however they are just that and they are diverging from the actual facts at hand. Until the will is settled as is stated to do anything but would be a breach of the powers that has executors they have been given.

I personally think putting a charge on the house would be totally the wrong way to go because it opens up way to many arguments, some of which have been described above. If that is the way the OP wants to go then its time to move from these boards and to a solicitor for formal legal advice not advice based on experience

Rob