Inheritance Query

scottie64

Hi,

My Grandmother asked me to be the executor to her estate when she passes away. She wrote a will 15 years ago - sadly she now has advanced dementia so is unable to make any changes.

She has been in a care home for about 7 years, her house has been rented out during this time as she wanted to keep the house in the family.

One son lives nearby and has cared for her for 10 years - she has bequethed her house to him when the time comes.

There are 2 daughters and another son who live around the UK and visit maybe once or twice a year. She has left these specific amounts of money.

The residue of the estate was to go to the son who inherits the property.

However obviously circumstances have changed since the will was written.

She has paid for her care and the local authority have recently started to put a charge against the house to pay for her care as she is now below the threshold.

This means that there also is not enough money to fulfill all the specific money bequests.

Although she has not yet passed away she is not very well, and relations between the 4 siblings are not very good.

As far as I'm aware other than the charge on the property there are no other debts.

I'm looking for advice on the following:

As there is not enough money to pay for the cash bequests does the house have to be sold/the person inheriting the house have to get a loan in order for the bequests to be fulfilled?

Or does the house go to the person inheriting the house and the cash bequests be reduced?

If there is a tennant in the property at the time of her death what happens to the rental income - does it belong to the estate and be used towards the cash bequests or to the person inheriting the house.

Does the charge against the house become the responsibility of the person inheriting the house or is it the responsibility of the estate before anything is distributed?

g6jns_2

scottie64 wrote: »

Hi,

My Grandmother asked me to be the executor to her estate when she passes away. She wrote a will 15 years ago - sadly she now has advanced dementia so is unable to make any changes.

She has been in a care home for about 7 years, her house has been rented out during this time as she wanted to keep the house in the family.

One son lives nearby and has cared for her for 10 years - she has bequethed her house to him when the time comes.

There are 2 daughters and another son who live around the UK and visit maybe once or twice a year. She has left these specific amounts of money.

The residue of the estate was to go to the son who inherits the property.

However obviously circumstances have changed since the will was written.

She has paid for her care and the local authority have recently started to put a charge against the house to pay for her care as she is now below the threshold.

This means that there also is not enough money to fulfill all the specific money bequests.

Although she has not yet passed away she is not very well, and relations between the 4 siblings are not very good.

As far as I'm aware other than the charge on the property there are no other debts.

I'm looking for advice on the following:

As there is not enough money to pay for the cash bequests does the house have to be sold/the person inheriting the house have to get a loan in order for the bequests to be fulfilled?

Or does the house go to the person inheriting the house and the cash bequests be reduced?

If there is a tennant in the property at the time of her death what happens to the rental income - does it belong to the estate and be used towards the cash bequests or to the person inheriting the house.

Does the charge against the house become the responsibility of the person inheriting the house or is it the responsibility of the estate before anything is distributed?

The charge against the house is simply a way of securing the debt. When the owner dies this debt has to be paid from the estate. If there are insufficient funds in the estate to meet the debt then the house will have to be sold. The remainder of the estate then has to be distributed according to the will. Rental income during the process of probate becomes part of the estate. I am assuming the person lives in England or Wales.

nom_de_plume

Probably more questions than answers and only based on my limited knowledge of the situation in England (is the OP Scottish with a user name of scottie64?).

First question is, is there enough funds to pay off any debts from savings, etc?

This means that there also is not enough money to fulfil all the specific money bequests.

If this is the case, the cash legacies would be abated (reduced proportionately) to reflect the reduced monies available.

The house would go, in full, to the specified beneficiary. He would also get the rent from the date of death.

If, however, there was not enough money from savings, insurance policies, etc., to pay any debts and the house needed to be sold to settle outstanding balances, I don't know if the beneficiary named as receiving the house would be entitled to the balance from the house sale or if the money should be shared amongst the other beneficiaries. My gut feeling is that the son should get all the balance as the other beneficiaries legacies would already have 'failed'.

Mojisola

My view - assuming this in happening in England or Wales -

If the son can pay the charge against the house for the estate, he can inherit the house and the cash gifts will fail if there isn't cash in accounts to pay them. Rent from the house will go into the estate while it is being managed by the executor. If there are any other debts at the time of death and no money left to pay them, the son would need to give the estate enough to cover these if he wants to stop the house being sold.

If the son can't pay the charge against the house, the house will have to be sold. There will now be cash in the estate to pay the specific bequests. As residual beneficiary, the carer son will inherit whatever cash is left.

nom_de_plume

I recently dealt with an estate that had a rental property left specifically to one individual. I took legal advice and the rent goes to the beneficiary from the date of death as similarly described here.

The complicated bit is if the debts come to more than the value of the rest of the estate excluding the house. I doubt your solution of the beneficiary being able to put in cash to sway the estate in his favour is correct as this IMO is unfair as it favours someone who can lay their hands on funds and so is not a level playing field. The question really is the order of events. Do failed beneficiaries get removed from the equation one at a time in the pecking order described here or do they all remain and the house gets removed? My gut feeling is the house exists at the death and all or part would go to the originally named beneficiary but I must stress that is speculation and the executor needs to seek professional advice if this is indeed the situation.

g6jns_2

nom_de_plume wrote: »

Probably more questions than answers and only based on my limited knowledge of the situation in England (is the OP Scottish with a user name of scottie64?).

First question is, is there enough funds to pay off any debts from savings, etc?
If this is the case, the cash legacies would be abated (reduced proportionately) to reflect the reduced monies available.

The house would go, in full, to the specified beneficiary. He would also get the rent from the date of death.

If, however, there was not enough money from savings, insurance policies, etc., to pay any debts and the house needed to be sold to settle outstanding balances, I don't know if the beneficiary named as receiving the house would be entitled to the balance from the house sale or if the money should be shared amongst the other beneficiaries. My gut feeling is that the son should get all the balance as the other beneficiaries legacies would already have 'failed'.

The charge is a debt owed by the estate. That has to be cleared before the estate can be distributed. This means the house will have to be sold. The net proceeds of the sale less the charge then become the rest of the estate. That gets distributed according to the will. The only gif to fail is the the house.

nom_de_plume

g6jns wrote: »

The charge is a debt owed by the estate. That has to be cleared before the estate can be distributed. This means the house will have to be sold. The net proceeds of the sale less the charge then become the rest of the estate. That gets distributed according to the will. The only gif to fail is the the house.

Just re-reading the original post again it sounds as though there are sufficient funds to clear the debt BEFORE the house needs selling.

As there is not enough money to pay for the cash bequests (***) does the house have to be sold/the person inheriting the house have to get a loan in order for the bequests to be fulfilled?

Or does the house go to the person inheriting the house and the cash bequests be reduced?

I suspect the words 'in full' are missing from the above (***)

If that is indeed the case, the first scenario in my first reply is the answer.

getmore4less

There are clear rules on abaitment on HMRC web site.

http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm12086.htm

Savvy_Sue

I do not know what the rules are about executors incurring expenses prior to death, but in the OP's position I think I would take legal advice, the kind I could rely on because I'd paid for it, and allow a solicitor well qualified in probate law to advise me on this. I might then decide I could distribute the estate myself, but I'd want that backing behind me ...

g6jns_2

Savvy_Sue wrote: »

I do not know what the rules are about executors incurring expenses prior to death, but in the OP's position I think I would take legal advice, the kind I could rely on because I'd paid for it, and allow a solicitor well qualified in probate law to advise me on this. I might then decide I could distribute the estate myself, but I'd want that backing behind me ...

Executors have no powers to incur expenditure before the testator dies. It would be up to the testator to get advice before they make a will.

g6jns_2

nom_de_plume wrote: »

Just re-reading the original post again it sounds as though there are sufficient funds to clear the debt BEFORE the house needs selling.

I suspect the words 'in full' are missing from the above (***)

If that is indeed the case, the first scenario in my first reply is the answer.

The OP specifically said there were not sufficient funds to do this.