Trustees and property-can you help my mum?

cazzicat

Hi everybody,
I am trying to help my elderly mum who is being pressurised by the solicitor acting for her late partner's estate. Mum and partner owned their house in two equal shares as tenants in common and he left his share in trust for four minors one of whom will be 21 next year. The solicitor acting for his estate is pushing her to change the legal title from her name ( and her deceased partner's) to her name and two trustees nb she is also a trustee, so then the house will be in three names at the land registry. However this is really worrying me as the other two trustees despise my mum and our family ( for no good reason as my mum cared for her partner who had dementia for many years and his family did not offer a single day of respite! ). I am worried that when my mum dies the legal ownership of the house will be these two trustees despite the fact that my mum owned half.
I understand that even mum's executor who will be me and my sister will be at the mercy of the two trustees. So I want my mum to refuse to transfer the legal title to these trustees.
Is there any other option? the solicitor is focussed only on protecting the half share in trust, but if that means altering the title that will be a severe detriment to my mum's beneficiaries and indeed to my mum if she decides to downsize. Does anyone know of other solutions for a problem which must come up regularly?

xylophone

Your mother owns her share - this does not change. Did her partner leave her a life interest in his share of the property so that she now has an interest in possession?

http://www.greenwoods.co.uk/knowledge-base/private-client/life-interest-trusts/

The house should properly be registered in the names of your mother and The Trustees of the (partner's name) Will Trust?


Your mother can still will her half of the property to whomsoever she chooses and you as her executor will carry out her wishes.

Presumably the title at the Land Registry would show your mother's ownership of her half and would prevent the property's being sold or otherwise disposed of without her permission in life or without the permission of her executor in death?

What advice has your mother's solicitor given her?

Thrugelmir

Whatever your personal feelings towards the other parties. There's no grounds not to accede to your mothers late partners wishes legally. You'll just have to accept the situation as it is and work with it. Ensuring that your mothers interests are properly protected.

cazzicat

Thanks for the reply. She has a life interest in her late partner's share.

The Land Registry have told me they do not register the shares of ownership and those listed on the title have absolute rights to sell, which override an executors so on my mum's death the two other trustees can do what they like with the property and do not even have to consult an executor. For example they could use it as collaterol for a loan etc, sell it to a mate, sell it without telling us etc
Itis unconscionable to me that the house could end up being in the control of two individuals whose relatives have a beneficial interest in only one quarter of the asset with the family who has beneficial interest in three quarters and an current legal ownership of half with an eventual legal ownership of three quarters (when the minors interest vests) having no control whatsoever.
I understand from further research since I posted that my mother does not have to transfer and can instead either do nothing or suggest a mutually agreeable restriction be placed on the title eg to consult with the other trustees. She herself is a trustee so there is one on the title already.
I hope this will be useful info for anyone else in this situation as it has taken me an age of research to find anything helpful on the net.
ps my mum cannot afford a solicitor on a basic state pension.

cazzicat

xylophone wrote: »

Your mother owns her share - this does not change. Did her partner leave her a life interest in his share of the property so that she now has an interest in possession

The house should properly be registered in the names of your mother and The Trustees of the (partner's name) Will Trust?


Your mother can still will her half of the property to whomsoever she chooses and you as her executor will carry out her wishes.

Presumably the title at the Land Registry would show your mother's ownership of her half and would prevent the property's being sold or otherwise disposed of without her permission in life or without the permission of her executor in death?

What advice has your mother's solicitor given her?

Thanks for that advice. Does the term trustees in xs will trust qualify as one person or are each named on the Title Register thus giving them a majority over my mother?
There is a Form A restriction on the title but nothing else?

kidmugsy

cazzicat wrote: »

Thanks for that advice. Does the term trustees in xs will trust qualify as one person or are each named on the Title Register thus giving them a majority over my mother?
There is a Form A restriction on the title but nothing else?

Trustees have to act unanimously so any one of them has power of veto.

As xylophone implied she must hire her own solicitor. Until she receives his advice, she should sign nothing.

xylophone

Your mother owns her half of the house, has a life interest in her partner's share and is a Trustee of the Will Trust - the fact that she is a Trustee protects her position while she is alive - Trustees must be in agreement on Trust decisions.

She can leave her share of the house in her will - I would be surprised if on her death the remaining Trustees could sell the property against the will of the executor of her estate without a court order. Similarly, I doubt that the executor could sell without a court order against the will of the Trustees.

However, as this is clearly a matter of concern, your mother should take advice from her solicitor as to what action should be taken to protect the beneficiaries of her estate on her demise.

Land_Registry

cazzicat wrote: »

Thanks for the reply. She has a life interest in her late partner's share.

The Land Registry have told me they do not register the shares of ownership and those listed on the title have absolute rights to sell, which override an executors so on my mum's death the two other trustees can do what they like with the property and do not even have to consult an executor. For example they could use it as collaterol for a loan etc, sell it to a mate, sell it without telling us etc

If you were advised as to the part in bold then it may help to clarify or reiterate what happens from a registration perspective bearing in mind that we primarily deal with the legal ownership (the registered owners) and not the beneficial ownership (wills and trusts).

If your Mother transferred to herself and the two trustees then on her demise the surviving joint owners could deal with the legal ownership/title for example sell the property.

That does not equate to 'do what they like' as the beneficial ownership is still in play due to the wills, trusts etc. The law can be complex around such matters but it is there to protect those with a beneficial interest and account for the manner in which an estate is dealt with. The law is therefore there to protect you or any other beneficiary of your Mother's estate.

In most cases such matters are dealt with amicably especially where all interested parties are aware of the wills and wishes of the deceased. Clearly things can go awry and whilst they might do as they like, if the wills/trusts have been put in place to protect all the beneficial interests then in doing so they risk being brought to heel by the courts.

So the key thing to remember is that we deal with the registered title/legal ownership. We do not deal with the beneficial ownership, which in your example would relate largely to the capital monies from any sale for example and the remainder of the deceased's estate such as any insurance monies, valuables and so on.

Understanding the difference between the two estates and the powers and roles of an executor are fundamental to understanding how best to protect an interest here. That works for both your Mother, yhe trustees and anyone else with an interest in the property, either now or at a later date by virtue of say your Mother's will

If you flip this example round to the two trustees' own position their interest is currently only protected on the registered title by the form A restriction. That restriction prevents your Mother, as the sole registered owner, from selling the property without first appointing someone to act with her to 'take receipt of the capital monies'. She does not have to appoint say one or both of the trustees. They could argue that their interests are inadequately protected on the register as a result especially as if your Mother were to die her executor could sell the property etc etc..................as mentioned above

As others have posted you really do need legal advice around the protection of trusts and the impact of either transferring the ownership as suggested or the registration of a restriction to further protect the trustees' interests.

cazzicat

Thanks for your help. I was advised by the land registry that the legal owners on the Titke Register can sell the house as long as there are two of them with the form A restriction in place. So I am obviously concerned about what would happen if my mother died and the two trustees were left on the title, both from the other side of the divide.
I am not trying to override their famiy's beneficial interest but am determind to protect my mother and her family who own three quarters of the property. One of the minors on our side ( mum's grandchild) becomes of age to inherit her share in 2016 so maybe my mother could put her on the title and either add one other trustee or an agreed restriction....or both.

xylophone

Remember that as far as the law is concerned, a minor is a person aged under 18 (16 in Scotland).

The partner's half of the property is held in trust for four young persons - I am not sure that the member of your family could be registered as you suggest.

Does your mother have a solicitor?

If not, I would strongly suggest that she consults one about this matter and her own will - a member of STEP might be the best port of call.

http://www.step.org/member-directory

cazzicat

This is what I found on the net yesterday which is very helpful. It is from the point of view of the trustees but does capture the position of others with an interest like my mum. As Katherine says, people can sell properties and spend the money so relying on the legal system after the fact is not only horrendously expensive, it may also be too late. Hence why I cannot allow a position where my mum's family lose control of the eventual sale.



The tenancy in common trap By Katherine Neal
ImageKatherine Neal questions whether, in today's world, a trust of land is sufficient protection for personal representatives.
We are all aware of the distinction between a tenancy in common and joint tenancy. Though joint tenancies have been the norm since land registration became compulsory, this has changed in recent years. Modern tax planning has encouraged severance of joint tenancies to ensure that the nil-rate band for inheritance tax purposes can be used on the first death, particularly when the deceased’s estate does not have enough liquid assets (such as shares and cash) to cover it. The increase in divorce and the emergence of more second families has also meant that more couples want to be able to differentiate between their individual assets and ensure that their ‘share’ passes to their chosen beneficiaries. In addition, rising house prices have led to first-time buyers looking for family support to buy property and to this interest being recorded on the title.

When property is registered as a tenancy in common the Land Registry standard Form A restriction is placed on the title, providing that there can be no disposition by a sole co-owner under which capital money arises. To all intents and purposes the co-owners’ positions are protected. One of them cannot give a valid receipt and sell the property without the other co-owner. But are personal representatives (PRs) equally protected?

In an ideal world the answer is, of course, yes; traditionally we have relied on the surviving co-owner to honour the trust of land and, for example, appoint the PRs as their co-trustee and enter them on the title. But what happens where the co-owners were estranged at the time of one co-owner’s death? Should PRs be confident that the estate property, for which they are liable, is safe? The answer is that it is remarkably easy for the surviving co-owner to over-reach the interest of the PRs or beneficiaries of the estate and therefore the interests of their deceased co-owner and the terms of the trust of land. It makes little difference whether this is a formal or informal trust.

The Land Registry is not, and has never been, interested in the underlying trust of land. Its position is that the restriction on the title is not there to protect co-owners but to guard potential purchasers. When a co-owner dies, whether a joint tenant or a tenant in common, the Land Registry will automatically remove their name from the title on production of the death certificate. The PRs are still protected by the restriction, which cannot be removed by a sole co-owner. While this is quite true, the surviving co-owner can appoint their own co-trustee without reference to the PRs of the deceased’s estate. They can then transfer the property into the names of themselves and this co-trustee. The restriction does not stop this, as money does not change hands. Once the new co-trustee is on the title there are the requisite two co-owners to give a valid receipt and sell the property. The PRs would know nothing about this.

What remedies and options are open to the PRs?
The only remedy is to sue the surviving co-owner for breach of trust, but the PRs could well find themselves suing a ‘man of straw’, particularly if the co-owner has spent the proceeds, if indeed they can even track the co-owner down.

The obvious way for the PRs to try and protect their position is to ask the co-owner to agree to transfer the title of the property into their joint names, ensuring that they would have to be involved in any disposition of the property in order for the purchaser to get a good receipt. If this proves to be impossible then they can apply to enter a restriction on the title, seeking to prevent the surviving co-owner from disposing of the property without reference to them. This could take the form of an agreed restriction with the co-owner or a unilateral restriction using Land Registry Standard Form N or Q. Unfortunately, if the only option is for the PRs to make a unilateral application for a restriction on the title, particularly where there is an estrangement with the co-owner, the Land Registry can and will refuse the application, its grounds being that PRs, or beneficiaries of estates, do not have a sufficient beneficial interest in the property and therefore have no right to apply for a restriction.

The Land Registry cannot be swayed from this position, and has taken the point to counsel with reference to s42 Land Registration Act 2002 (see box) and to ask advice on the entry of a restriction in respect of an interest arising under a trust of land (this is saved as counsel’s opinion number 132 with the Land Registry – a full copy of which can be requested). Counsel advised that any person with a derivative interest – we assume they mean an interest derived from a co-owner’s interest – will not be able to apply for a different form of restriction (other than Form A):

1. Section 42(1)(a) is only concerned with preventing unlawfulness or invalid dispositions of registered estates and not with subsequent dealings with the proceeds of sale.

2. A derived interest is not a right or claim in relation to a registered estate within s42(1)(c) as it is a right or claim in relation to the interest under the trust of land (not in relation to the registered estate).

There is no obvious indication as to whether this extends to s42(1)(b), which seeks to secure an interest that is capable of being overreached on a disposition of the registered estate, but in practice the Land Registry does refuse such applications.

It seems, then, that PRs are not protected at all by the standard form of restriction on tenancies in common, and there is little they can do to protect their beneficial interest after the death of the co-owner. They could find themselves in the uncomfortable and costly situation where a co-owner has sold the property and applied the proceeds without reference to the estate.

This is not a new position, but it is one that does not seem to sit well in modern society. As lawyers we are in the unenviable position of having to tell our clients that there is nothing we can do to protect their interest as PRs. Where we are the PRs we could even be liable to claims on our indemnity insurance. Also, as conveyancers do, we explain to our clients the extent, or lack, of protection that the standard form restriction provides. The only way to ensure total protection is for co-owners to agree to an added restriction on the title before either of them die or before they become estranged. We should seriously consider advising all tenants in common to do this, or run the risk of further indemnity insurance claims. © Property Law Journal.