Life trust / life tenant question

Blue_Monkey

Can someone provide me with an example with figures please of how things work with a life trust?


My father is terminally ill and wants to leave the house he shares with my stepmum in trust for me, my sibling and my stepmother's nephew.


My stepmother's will states her assets will be divided in three between me, my sibling and her nephew.


The house is currently worth approx. 700k.


How does it work if my stepmother wants to move (she'll probably want to downsize at some point)?


I understand that only 50% of the house would go in trust (ie my father's half), so does that mean that my stepmother only has 350k to spend on a new property? Is that 350k totally outside the trust? Can she access the other 50% at all? What happens to the remaining 350k that was my father's 50%?


This is such a delicate subject, and my father's condition is worsening. I want to ensure my stepmother has access to the funds she might need after my father dies, but I know my father is also keen to secure our inheritance too.


Any help in terms of figures/examples would be much appreciated.


Thanks.

Yorkshireman99

Blue_Monkey wrote: »

Can someone provide me with an example with figures please of how things work with a life trust?


My father is terminally ill and wants to leave the house he shares with my stepmum in trust for me, my sibling and my stepmother's nephew.


My stepmother's will states her assets will be divided in three between me, my sibling and her nephew.


The house is currently worth approx. 700k.


How does it work if my stepmother wants to move (she'll probably want to downsize at some point)?


I understand that only 50% of the house would go in trust (ie my father's half), so does that mean that my stepmother only has 350k to spend on a new property? Is that 350k totally outside the trust? Can she access the other 50% at all? What happens to the remaining 350k that was my father's 50%?


This is such a delicate subject, and my father's condition is worsening. I want to ensure my stepmother has access to the funds she might need after my father dies, but I know my father is also keen to secure our inheritance too.


Any help in terms of figures/examples would be much appreciated.


Thanks.

Your father needs paid for professional advice from a trust specilaist who is a STEP member. You may get good advice on here but there is no substitute foe the real thing particualrly with the value involved.

Blue_Monkey

This is just so I understand really. My father is seeing a trusted solictor, but family politics being what they are, and his illness progressing I don!!!8217;t want to ask about it all.

getmore4less

These are what is know as an Immediate Post Death Interest(IPDI) trusts
(google there is loads of info)

The will determines the exact terms of the trust and can include reuse for the funds on sale to downsize along with other option like who is responsible for maintenance etc.

ownership of the house will determine what goes in the trust.

What this means in practice(subject to specific terms of the trust) is the beneficial interest of the share in trust belongs to the life tenant.

For IHT the assets is theirs, they get spouse exemption(if married it does not use up nil rate band), they also qualify for PRR so no CGT on disposals.

Any disposal or money coming out of the trust is usually a PET on the life tenants estate.

Given the time pressure you are going to have to get a solicitor on this fairly quickly.
edit: OK that bits done

Yorkshireman99

Blue_Monkey wrote: »

This is just so I understand really. My father is seeing a trusted solictor, but family politics being what they are, and his illness progressing I don!!!8217;t want to ask about it all.

In which case why raise the topic here? The average family solicior is not a trust specialist. That is why your father should consult a STEP member as a matter of urgency it is not a straightforward matter as others suggest.

Blue_Monkey

Yorkshireman99 wrote: »

In which case why raise the topic here? The average family solicior is not a trust specialist. That is why your father should consult a STEP member as a matter of urgency it is not a straightforward matter as others suggest.

Um because I'd like to know how it works?
I never said my father is seeing an average family solicitor. I'm sure my father understands the set up, but I don't. And I don't want to ask because it's sensitive.

SevenOfNine

Blue_Monkey wrote: »

This is just so I understand really. My father is seeing a trusted solictor, but family politics being what they are, and his illness progressing I don!!!8217;t want to ask about it all.

As YM99 has stated...........................

Yorkshireman99 wrote: »

In which case why raise the topic here? The average family solicior is not a trust specialist. That is why your father should consult a STEP member as a matter of urgency it is not a straightforward matter as others suggest.

With the best of intentions, explanations here will involve an element of speculation, assumption or assorted variables for different situations, which may only serve to confuse you further.

If "family politics" are what they are, & your father has not asked you to accompany him to meetings with the family solicitor, then surely you are trying to understand something when you don't actually know exactly what is being planned, & not even involved in the planning in order to have any sway with decisions made.

Would he take kindly to any suggestions you may have from knowledge gleaned here? Would he co-operate if you suggested the "family solicitor" may not be in the best position to advise, given the value of the estate, & that a STEP member would be more experienced/qualified in the field of estate planning? Would he be open to the suggestion that you tag along?

Your stepmother's will can be altered at any point to leave everything she owns to Battersea Dog's Home if she so chooses. So I 'get' why your father's will & any trust set up he arranges should be watertight if he does indeed want to look after everyone properly with whatever he owns separately from her, but it would be better if he set down EXACTLY what he wants to achieve, point by point, so that he can have the pro's & con's carefully explained. In our own experience this was promptly followed up by written notes from the STEP solicitor, what we wanted to achieve & the advantages & pitfalls CLEARLY outlined (it's difficult to take it all in at a meeting). For a different matter with a bog standard solicitor this follow up has not been the case.

You won't really know what it is you're trying to understand until then I think. I don't know the circumstances of his illness, but he has clearly built up a decent 'estate', therefore perhaps you'll have to trust that he's still capable of sorting things out appropriately now, & leave your understanding of it until it's done.

Yorkshireman99

You have expressed it far better that I could and are absolutely spot on! I really do urge the OP to take your advice and convey it to his father.

Newly_retired

In any case, unless they own the house as Tenants in common, it will automatically become his wife’s and be outside his will.
We had to sever our joint tenancy in order to have a half to leave to our respective children. Our wills allow the surviving spouse to live in the property and be responsible for insuring and maintaining it. S/he can also sell it and the bequest to the heirs will continue in any new property purchased.
I hope this gives some idea, but it all needs to be properly drawn up.

Yorkshireman99

Blue_Monkey wrote: »

This is just so I understand really. My father is seeing a trusted solictor, but family politics being what they are, and his illness progressing I don!!!8217;t want to ask about it all.

With no disrespect, unless the trusted solicitor is STEP member, or trust specialist, then they are very unlikely to have the necessary expertise. It is a specialist area of the law that reuires a specialist solicitor. Getting thiis across to your father is the best way to help him and his family to avoid problems in future.