setting up a trust

seh567

My husband has recently passed away and as executor I need to action grant of probate of his estate. We made mirror IHT Discretionary Trust Wills 10 years ago and as Tenants in Common left the value of our share of our estate in trust at first death to go to our two sons on the death of the surviving spouse.

Two things I need some advice about:-

1) Can I do probate myself? There are no debts or monies owed, individual bank or savings accounts in his name other than a joint bank account which held approx £10k at time of death. I realize 50% would need to be shown as an asset in the estate. The wills were set up 10 years ago to ring fence 50% value of the marital home which at the moment is worth £300k so his share £150k will go into trust. I dont have enough savings to instruct a solicitor to do the grant of probate and it looks quite straight forward and it wont be over the IHT threshold.

2) How do I set up the trust? If there was monies I guess the executors would need to open a trust bank account but at the moment there is no monies just a valuation of the house as I dont intend to sell in the near future. Do I need to go to a solicitor to get some sort of document which confirms a trust has been set up or would this be the will itself.

Any information would be gratefully received.

g6jns_2

seh567 wrote: »

My husband has recently passed away and as executor I need to action grant of probate of his estate. We made mirror IHT Discretionary Trust Wills 10 years ago and as Tenants in Common left the value of our share of our estate in trust at first death to go to our two sons on the death of the surviving spouse.

Two things I need some advice about:-

1) Can I do probate myself? There are no debts or monies owed, individual bank or savings accounts in his name other than a joint bank account which held approx £10k at time of death. I realize 50% would need to be shown as an asset in the estate. The wills were set up 10 years ago to ring fence 50% value of the marital home which at the moment is worth £300k so his share £150k will go into trust. I dont have enough savings to instruct a solicitor to do the grant of probate and it looks quite straight forward and it wont be over the IHT threshold.

2) How do I set up the trust? If there was monies I guess the executors would need to open a trust bank account but at the moment there is no monies just a valuation of the house as I dont intend to sell in the near future. Do I need to go to a solicitor to get some sort of document which confirms a trust has been set up or would this be the will itself.

Any information would be gratefully received.

Sorry for your loss. If you have a joint bank account then that becomes yours. A few hundred pounds out of £10K will be greatly rewarded by getting a trust specialist to advise you. It really is not something to DIY. I would strongly advise you to get some advice even if you do the probate yourself.

SeniorSam

You could retain all the asets and simply give an IOU (Promisorry Note to pay) to the Trustees. That way you continue managing all assets, but have ring-fenced and protected the amount that your estate has promised to the Trust.

My wife and I have done this in our Wills and allowed for up to the nil rate band allowance to be promised, in order to make it far easier for her to manage everything, as I will probably go first. That money promised to the Trust cannot be touched if your assets were needed for care or anything else.

The wording of your Will may already allow for that to be done, but should be similar to the following:-

If my wife survives me by more than thirty days, I give to my trustees such sum as at my death equals the maximum amount which could be given to them on these trusts without Inheritance tax being payable in respect of this gift or such lesser sum as my trustees think fit ("the Trust Fund") to hold on the following discretionary trust:


That would be fiollowed by the usual things the Trustees should do with the fund if capital were allowcated to the Trust.

..........and then something similar to this ... ..................

I direct that with regard to the Discretionary Trust to be created, that the Trustees may accept an I.O.U. by way of a Promissory note in respect of the gift to the Trust of the nil rate band sum to secure that value.

.... Where we have the nil rate sum, you probably have his part of your home.

Should you wish to change the Will, then you would need a Deed of Variation, which would allow for any changes that beneficiaries agree, but needs to be done within two years of death.

I hope this helps you and am sorry for your loss.

Sam

SevenOfNine

Personally, I would start with no.1, leaving no.2 on the back burner just for the time being.....enough to think about obtaining the Grant. Whilst waiting for that you can do more intensive research regarding setting up the Trust.

Yes, you can do probate yourself (I handled it for a simple no Will, no property, no IHT estate). There is a thread on here started by a bereaved wife which may be of use to you. Perhaps g6jns can assist you with locating it. She also (like me) thought the process of obtaining the Grant/Letters might be more daunting than it was.

Do you have the PA1, guidance notes & appropriate tax form? Legal Beagles also has a useful forum, utilise 'helplines', AgeUK (ours locally has a 'solicitor' day). The time to pay a solicitor is if you cannot find the answer from others who've 'been there, done that', THEN you can buy some consultation time for professional help.

For the Trust (HMRC) I think it is important to obtain an accurate written current valuation of your home, possibly a couple for accuracy (as it sounds like you plan to drop 1/2 of it into the Trust). Hopefully others can suggest the best way to do that (estate agents?). On-line Zoopla can be useful to see how much/when others on your estate were sold, that on it's own might give you a rough guide for Probate for now (?).

I would suggest gathering together an accurate financial outline (statements etc) of everything that was your husbands (separate & joint), so you have a paper trail of his assets, again, for the benefit of the Trust (HMRC etc).

SeniorSam - am I correct in saying the 2 para's above? Don't want to create unnecessary work for the OP.

A quick skim of the info in this link in case any of it is of interest https://www.gov.uk/government/publications/nil-rate-band-discretionary-trusts/practice-guide-70-nil-rate-band-discretionary-trusts

House 'sold' prices, http://www.zoopla.co.uk/house-prices/
Current values - be careful with their accuracy in this section though http://www.zoopla.co.uk/home-values/?search_source=top_nav

SeniorSam

Correct. It is not that hard to do it yourself as there is lots of information on here and from the Revenue.

It may seem a daunting task, but you have time and the Revenue are extreemly helpful if you call them to ask questions. They realise that people need help and all the reports, as well as my own experience in the past tells me you should not worry about calling them and asking questions.
Ask on here if you have a problem and al of us will be pleased to help you.

Sam

SevenOfNine

Found the link to the bereaved lady's thread http://forums.moneysavingexpert.com/showthread.php?t=5165177

Sam, after OP has completed the Probate process, is there a specific form which she must use to notify HMRC that a Trust will be established? I suppose same applies for the Land Registry to perhaps change husbands part house ownership to that of the Trust.

There are parts of this where my own (or husbands) plan would be to consult a solicitor, for advice on the processes, then DiY it.....but only after getting as much freebie info as possible!

Edit: Just found some info here https://www.gov.uk/trusts-taxes/overview

seh567

Would be interested to know if there is a form to notify HMRC that a trust is to be established. As advised I think I will get a solicitor to do the legalities.

I am going to do probate myself and there is a section in there which asks percentage of value of the house if owned jointly as tenants in common. Have had 3 valuations so will take the middle ground.

Also once a trust has been set up there will be no cash assets only 50% value of the property. If I stay put and do not sell will I still have to pay tax on this value at 45% after 10 years or just the difference if increased in value, ie if house prices go up.

Thanks

SeniorSam

seh567....... one point to bear in mind on this, other than to confirm that the Will itself has already set up the Trust and also appointed the Trustees, so nothing to actually do straight away. The executors simply confirm in writing the value that is allocated to the Trust.

The point in question is in respect of gifting yout late husbands assets to the Trust. Yes you could put the assets into the Trust and have that administered by the Trustees, which I hope are members of the family. However, if that is likely to leave you with more difficulties, the Trustees can give an IOU, as mentioed earlier and that is then paid later from your estate, but totally protected from any attack of care costs or debts.

The actial point in question is regarding the announcement that if there is a Conservative election in May, then an additional allowance is expected to be made in 2017 to increase the allowance against inheritance tax. If that takes place, then if the first todie has gifted all or a part of their nil rate band allowance to a Trust, then that may negate a proportion or all of that new allowance.

There is no rush to take action immediately and it may be prudent to wait until after the election and then way up the options that the executors have then.

If your estates are unlikely to reach the allowance level, presently £325,000 each, but expected to increase to £500k each, then it can only 'shelter' the amount in the Trust.

I hope that is not too complicated for you, but do ask questions if not clear.

If half of the house is in the Trust, you will not pay tax, but the beneficiaries may have to pay capital gains tax on an increase during the period it is in the Trust.

Sam

getmore4less

Check but AIUI.
Keeping 1/2 the house in the trust protects it against future IHT and because of the life interest CGT.

The IOU route fixes the asset value.

The joint account gets spouse relief.

If house is the only asset at 150 then there is 53.8% ransferable nil rate band available giving you currently £500k nil rate band.

getmore4less

Who are the named executors in the will?

seh567

SeniorSam - Thank you for your explanations. I will wait until after the election but the value of the trust will only be £165k (half value of house). I thought the beneficeries would not pay capital gains because it is the marital home?

Named executors are myself and my two sons. The beneficeries living at my death are also myself, my sons, my grandchildren.