Nil rate band discretionary trust will query

SeniorSam

Did you mean £28,000 in the bank or just £28?

As your husband left certain sums to your children on his death, this still counts as a debt against the estate when you die. The fact that the children have allowed for this not to be paid now doesn't mean hat it is lost to them.

If you do move house later on, possibly to something smaller, any surplus available could make those gifts if you wish, or still delayed until later.

In these circumstances, it may be prudent to give each of the children a letter confirming that you will gift the sums allocated at a later date. This will ensure that those amounts are protected should you need to go into care.

Regarding the possibility of care costs, it will depend on how your husbands Will was constructed, but it could be arranged that even though inheritance tax does not look as if it will come into the calculations, half value of the home could be protected by an appropriate Trust.

Instead of your husband's half of the house passing to you, it could be passed to a Discretionary Trust, with the Trustees being you and the children. As Trustees, they could permit you using the value to move house if you wish, so you will not be disadvantaged at all and can do whatever you wish as long as you all agree.

If the present Will does not allow for this, changes can be made within a two year period, by a Deed of Variation. Easily done by a solicitor, so don't worry too much about this.

The idea would be that half of the house value would be permanently protected to pass on the the family. as your late husbands half would be sheltered. Discuss all matters with your family before making any decision on this.

Please ask for more information if this is unclear.

Sam

seh567

Hi Senior Sam. Thanks for information, I did mean £28000.00 silly me. Sounds a lot I know but wouldnt be much after gift wishes, funeral expenses, solicitors fees etc.

Fortunately the will is an IHT Descretionary Trust will and has been reviewed in the last couple of years by another solicitors who has confirmed the trust would be safe from care fees of the surviving spouse with both myself and my sons being trustees and executors. The solicitor who originally set it up 10 years ago was mindful that we were close to the IHT threshold because we were both still working and had death in service cover. We are both retired now so dont have that cover. Also I believe the IHT threshold can now be doubled by using some of the first deaths threshold although in our case I dont think it will be needed.

Any idea how much solicitors charge for probate and trust set up?

Thanks for your information so far, its been invaluable.

SeniorSam

The costs of solicitor to deal with Probate can vary enormously and it's best to shop around with the statement ' I am looking for solicitors to help with Probate and wish to know what you would charge if instructed?'

With the Wills that are in place, the assets of the first to die up to the value of the nil rate band allowance (£325,000) can be placed, or allocated to the Discretionary Trust. In doing so, then the first allowance is used for that purpose. The second to die would also have a nil rate allowance to offset against what they leave behind.In total £650,000 for you both.

The main benefit of using the Discretionary Trust, rather than passing all assets to the surviving spouse, are that the allocated amount is 'ring fenced' against any claims from others. So if the first one dies and leaves that amount to the Trust, the local authority would have no claim if care costs swallowed up the assets of the survivor.THis is not considered depravation of assets.

In addition, if there is a property 'half' allocated to the Trust, the Trustees can allow the property to be sold, to allow moving to something smaller if they wish, but the actual value that was allocated to the Trsut originally from the Will, is still Trust assets and protected as such.

Trustees also have powers to allow loans from the Trust, to ensure that the survivor is not in difficulties later on.

MY wife and I have similar Wills and in the event of me popping my clogs before her, I have tried to impress that solicitors want business and will negotiate ....... well many of them will. So no harm in even getting some quotes at this stage to get an idea for later on.

I hope this helps

Sam

seh567

So if I sold the house for £300k and purchased a flat for £180k. Would I be able to use the surplus £120k as my own monies leaving a charge of £150k against the purchase of the flat for the discretionary trust. Of course I realise this has to be agreed by the other trustees.

SeniorSam

We did cover this in the first reply I gave, but in effect yes, with approval of the Trustees.

If there was a surplus from the sale, it would be best in a Trust bank account. Then the Trustees could arrange to loan you whatever you need. The Trust would hold the balance, plus an IOU for any outstanding amount from the original gift to the Trust.

That way, your personal assets are kept to a minumum, which would be best if you were to go into care.

Sam

seh567

Now I understand, so thank you so much for your information

SevenOfNine

seh567 wrote: »

So if I sold the house for £300k and purchased a flat for £180k. Would I be able to use the surplus £120k as my own monies leaving a charge of £150k against the purchase of the flat for the discretionary trust. Of course I realise this has to be agreed by the other trustees.

SeniorSam wrote: »

If there was a surplus from the sale, it would be best in a Trust bank account. Then the Trustees could arrange to loan you whatever you need. The Trust would hold the balance, plus an IOU for any outstanding amount from the original gift to the Trust.
That way, your personal assets are kept to a minumum, which would be best if you were to go into care.Sam

SeniorSam - I will definitely bow to your knowledge, but surely seh567 wouldn't be able to put the surplus from the sale into a Trust bank a/c if she keeps the original Trust money tied up in the new house, as I think she has indicated as her 'charge' intention (sorry seh567 to talk about you like you're not here!).

The surplus from the sale would have to be only hers, otherwise the Trust assets haven't remained what they were when the Trust was initially set up (& HMRC notified), excluding any investment gains added on subsequently of course.

The Trust will have become the half of the original family home roughly £150K - now tied up as the new home, PLUS the balance from the sale of £120K which I read as you advising her to keep in a Trust a/c. So the Trust has now become £270K in asset & money.

Apologies for butting in, but as you know this is also interesting to me. If I have misunderstood what you've advised from seh567's question I'll delete this post so as not to confuse (or bore) others!

seh567

intersting point sevenofnine. I dont mind you butting in if it helps me understand.

Looking forward to Senior Sams reply

SeniorSam

The assets of the first to die would be half the house (tenants in common) plus any other assets owned by that person. The Trust would have clauses that allows the Trustees to loan or gift assets to the surviving spouse if they wish.

If the spouse them downsized to another smaller property, the Trustees would agree for this to be done. The property is sold, a new house purchased for say £150,000 and after completion, there may be a balance.

The Trust is still there with it's assets intact by the spouse owing whatever was borrowed from it. Therefore it remains protected for the beneficiaries and would not be attacked should care costs be needed at a later date.

Capital could be retained by the spouse, but if it is in the Trust account, it can still be loaned to the spouse as required.

The normal practice when assets of a Trust have been loaned, is that an IOU is given in return to the Trust to protect it for beneficiaries and charged on the property.

So to answer your question, yes, she could retain the balance if needed, but would give an IOU for the original loan.

I hope that's clear, but please ask if not.

Sam

The No.15 reply was correct.

SevenOfNine

Thank you & apologies Sam & seh567 for dragging you round in circles along with my erratic brain cells. At least 'the sun is over the yard arm' so we can all have a stiff drink. :beer: