Probate: Residue Income / Life interest on savings

gwernybwch

I’ve (probably stupidly) agreed to be the executor of an elderly relative’s will and myself and the other executors have been struggling to understand the advice of the – rather pompous – Solicitor.

The situation is that the will of the husband / father is tenants in common in equal share with the wife / mother for their mortgage free home. There are also savings (mostly in building societies savings accounts) to which the will states “to pay the income from the residue to my wife until her death”. After the death of the wife / mother, the home and the savings are inherited by the children.

The query is really regarding the life interest in the savings.
As I understand it we have to ensure that the savings are invested in such a way to achieve a balance between producing an income for the wife / mother and maintaining the capital for the children when the wife / mother dies.
Where we are lacking any advice is what this actually means in reality. We have asked can it just leave the money in the existing building society savings account; the answer is apparently not. When asked what sort of account we need to invest it in, it seems that the Solicitor can’t advise us on this, but only decide whether the type of account that we open meets their requirements!

So the query is does a “life interest” account have to be a special type of account? Will a regular savings account (or even a high yielding current account) be sufficient? Are we able to invest it in shares or even P2P lending? Or does it have to be in a “life interest trust”?

For what it’s worth, I know that the wife / mother has enough of her own savings meanings that she will never need to access her “life interest” in her deceased husbands savings!

Mojisola

gwernybwch wrote: »

I’ve (probably stupidly) agreed to be the executor of an elderly relative’s will and myself and the other executors have been struggling to understand the advice of the – rather pompous – Solicitor.

Why don't the executors find a more helpful solicitor?

gwernybwch

Mojisola wrote: »

Why don't the executors find a more helpful solicitor?

We are where we are.

But to answer your question; they have considered it but have come to the conclusion that as we are on the last leg of the probate process it is easier to stick with an unsatisfactory (STEP) solicitor than jump ship at this late stage.

getmore4less

can we assume that all the remaindermen of the trust(the kids from what you have said) are all over 18.

Do the kids want the money ringfenced for themselves later or would they be happy that their mum had access to it all now?

DOV making mum the beneficiary

or

Is mum happy not to have the income from these ring fenced savings and let the kids have it now.

dissolve the trust and dish out the cash AIUI as a PET for IHT purposes.

Yorkshireman99

gwernybwch wrote: »

We are where we are.

But to answer your question; they have considered it but have come to the conclusion that as we are on the last leg of the probate process it is easier to stick with an unsatisfactory (STEP) solicitor than jump ship at this late stage.

In a way the solicitor is correct inasmuch as he is not professionally qualified to give financial advice. How much is the capital sum?

gwernybwch

Thanks for the reply.

getmore4less wrote: »

can we assume that all the remaindermen of the trust(the kids from what you have said) are all over 18.

Do the kids want the money ringfenced for themselves later or would they be happy that their mum had access to it all now?

DOV making mum the beneficiary

or

Is mum happy not to have the income from these ring fenced savings and let the kids have it now.

dissolve the trust and dish out the cash AIUI as a PET for IHT purposes.

Both the children are over 18. I don't think that the kids have a preference either way regarding the ringfencing / access it all now. If the mother wanted to access it - which I don't think that she would ever want or need to do, I don't think that the children would stand her way. I think that the bigger consideration for the children is minimalising IHT as the Mum is close to her IHT limits as it already is.
We have been told about the possibility of the Mum waivering her access to the savings via a 'deed of variation', but at the moment they just want to be done with the Solicitor / probate and then think about those types of decisions in a couple of months time.

I think that their ideal situation would be some kind of easy to open / easy access account to put the money in, which the Solicitor considers is agreeable to them.

getmore4less wrote: »

dissolve the trust and dish out the cash AIUI as a PET for IHT purposes.

Sorry I don't understand what means?

Crabapple

If it's a lot of money you'd be better off seeing an Independent Financial Advisor about that part of things.

But I'd agree with looking at winding up the trust of the widow is not going to need the money.

getmore4less

gwernybwch wrote: »

Thanks for the reply.


Both the children are over 18. I don't think that the kids have a preference either way regarding the ringfencing / access it all now. If the mother wanted to access it - which I don't think that she would ever want or need to do, I don't think that the children would stand her way. I think that the bigger consideration for the children is minimalising IHT as the Mum is close to her IHT limits as it already is.
We have been told about the possibility of the Mum waivering her access to the savings via a 'deed of variation', but at the moment they just want to be done with the Solicitor / probate and then think about those types of decisions in a couple of months time.

I think that their ideal situation would be some kind of easy to open / easy access account to put the money in, which the Solicitor considers is agreeable to them.

Originally Posted by getmore4less View Post
dissolve the trust and dish out the cash AIUI as a PET for IHT purposes.

Sorry I don't understand what means?

You do realise that these assets in the trust should form part of mums estate for IHT purposes(looks like an immediate post death interest IPDI)

A DOV to give it to the kids won't help as that will use up part of the transferable nil rate band.
A DOV to give it to mum so she can gift it is probably better.

by dissolving the trust(basically finishing it) the remaindermen get their inheritance.

for IHT purposes it looks like a gift from mum a PET.

How much are we talking about?

With the transferable nil rate band and the residential there is probably around £1m nil rate band available in a few years.


To me it looks like the trust id more bother than it is worth so get legal advice on the options to eliminate is in an IHT friendly way.

gwernybwch

Yorkshireman99 wrote: »

In a way the solicitor is correct inasmuch as he is not professionally qualified to give financial advice. How much is the capital sum?

I understand that she isn't qualified to give finance advice, so in some ways can understand why she is taking this stance. Although she is a bit of strange one. Her general management of the probate and the legal advice has been poor, but some of the other pointers that come under other advice from other professional have been very useful! So many times she has strayed away from strictly giving legal advice. But know she knows that we aren't happy with her, she is firmly remaining on a high horse.

The capital sum is likely to be around £55k.

Thanks.

Yorkshireman99

gwernybwch wrote: »

I understand that she isn't qualified to give finance advice, so in some ways can understand why she is taking this stance. Although she is a bit of strange one. Her general management of the probate and the legal advice has been poor, but some of the other pointers that come under other advice from other professional have been very useful! So many times she has strayed away from strictly giving legal advice. But know she knows that we aren't happy with her, she is firmly remaining on a high horse.

The capital sum is likely to be around £55k.

Thanks.

Ask around for a personal recomendation for an IFA to use. Alternatively get properadvice on the possibility of disolving the trust. Don't rely solely on advice from here.

gwernybwch

getmore4less wrote: »

You do realise that these assets in the trust should form part of mums estate for IHT purposes(looks like an immediate post death interest IPDI)

A DOV to give it to the kids won't help as that will use up part of the transferable nil rate band.
A DOV to give it to mum so she can gift it is probably better.

by dissolving the trust(basically finishing it) the remaindermen get their inheritance.

for IHT purposes it looks like a gift from mum a PET.

How much are we talking about?

With the transferable nil rate band and the residential there is probably around £1m nil rate band available in a few years.


To me it looks like the trust id more bother than it is worth so get legal advice on the options to eliminate is in an IHT friendly way.

The will says “to pay the income from the reside (my residuary estate) to my wife until her death and after her interest ceases, I give my residuary estate to my children in equal shares”.
From that I understood that if the Mum didn’t access the capital, it wouldn’t form part of her estate from IHT point of view?
But yes, if Mum or the children accessed the capital (via a deed of variation) then it would form part of the Mothers estate.

Thanks for the suggestions regarding possible future solutions, but at the moment they just want to get the probate done, rid themselves of the tempestuous solicitor then think about exemption transfers or deeds of variations around springtime.

Yorkshireman99 wrote: »

Ask around for a personal recomendation for an IFA to use. Alternatively get properadvice on the possibility of disolving the trust. Don't rely solely on advice from here.

They have a non-independent financial advisor that they have used previously, but they can't offer anything which is suitable.

I think that there is zero chance of them investing that kind of money long term without seeking IFA advice, but for the reasons that they want it for - a short-term easy entry and exit account which meet s the Solicitor requirements - paying an IFA seems rather expensive way of being told "just stick it in a NS&I Income Bond".

From the further research I've done, it seems that there are "trust accounts" or "trustee accounts" that might serve the purpose?