Information gathering on Will and Trust Funds

babymama89

Hello people 
I'm hoping i'll be able to get some advice from MSEs on  how to brace the subject of Will and Trust Fund, i'll provide some context below and also summarise what i know so far. My question is now about what do i (we) need to know and what are the next steps 
Context
I'm doing some research for a good friend  (MS) who up until recently refused to draw up a will or address what would happen if she drops dead tomorrow. She says  the children will sort it out and know what to do. Unfortunately( and fortunately) the pandemic has given MS an  opportunity to reassess  her priorities, convincing her to put her affairs  in order. I've been tasked as the Chief Research Officer on the choices available.
I digress as this is meant to be a context, MS is a  65 year old  hardworking. single (but not officially divorced) public servant. She has 3 children aged 34, 32, and 30  and she has 2 properties in the South East of England
Property 1 is another 3- bedroom house worth about £380k  with about £100k mortgage, MS currently lives in Property 2 
Property 2 is a flat worth about £180k with at least £100k mortgage- this is rented and MS pays tax on the rental income 
MS separated from her husband about 2 years ago but they are not officially divorced. The husband (HB) lives in Malta and they have little or no contact. However, MS is afraid that if she dies today, then all her properties would transfer to HB. HB and MS married about 10 years ago, but MS had acquired all these assets before they met and they have never actually lived together for more than 6 months. HB has 3 grown up kids not from MS and all the properties are only in MS's name only 
What I know 
- A trust fund is used to avoid a probate. if a will is not drawn up before death, then the benefactors would have to go  through probate in the court 
- A trust  fund provides creditor protection for the inheritance, so if the beneficiaries are in debt or court order, the court cannot seize the assets as part of the court order 
- There are two types of Trust - a lifetime trust which  is effective immediately and MS (or the trustor) can be in charge of the Trust while they are alive and make changes , but must appoint a successor  trustee to step in once the person becomes incapacitated . The second type is a will trust which is created upon death. 
- If the profit ( inheritance?) across the 2 properties above exceeds £325k the beneficiaries are subjected to IHT 
Questions
- What's the difference between a will and a trust fund ? 
Help i'm confused on what else I need to know as i've been researching this for the past 4 hours and not getting anywhere

Yes MS will get some official guidance from a qualified professional but  i'm just trying to provide some preliminary information so she has a basic  knowledge before approaching the market 
Many thanks in advance 

Mojisola

babymama89 said:

MS is a  65 year old  hardworking. single (but not officially divorced) public servant.

As she isn't divorced, she is still married.  If she dies without making a will, her husband will be the main beneficiary of her estate.  That should spur her on to get the will written.

xylophone

You might ask your friend to read this.
https://www.gov.uk/inherits-someone-dies-without-will

Your friend is a  still legally married civil servant  - she should look at

 https://www.civilservicepensionscheme.org.uk/media/591417/how-to-claim-death-benefits.pdf

A trust fund is used to avoid a probate. if a will is not drawn up before death, then the benefactors would have to go  through probate in the court 

This is very garbled.

If a person dies without a will, then "Letters of Administration" are required - probate process under another name  really.

https://www.myerson.co.uk/news-insights-and-events/what-is-the-difference-between-grant-of-probate-and-letters-of-administration

You have become very confused concerning IHT and how and when it is due.

Judging from what you have said above, it seems to me unwise for you to act as research officer for your friend as you might both end up in a state of utter confusion.

"A little knowledge is a dangerous thing".

Your friend should on no account get involved with any sort of Trust without expert advice from a competent, qualified and experienced solicitor.

See https://www.step.org/step-directory

badger09

babymama89 said:

Hello people 
I'm hoping i'll be able to get some advice from MSEs on  how to brace the subject of Will and Trust Fund, i'll provide some context below and also summarise what i know so far. My question is now about what do i (we) need to know and what are the next steps 
Context
I'm doing some research for a good friend  (MS) who up until recently refused to draw up a will or address what would happen if she drops dead tomorrow. She says  the children will sort it out and know what to do. Unfortunately( and fortunately) the pandemic has given MS an  opportunity to reassess  her priorities, convincing her to put her affairs  in order. I've been tasked as the Chief Research Officer on the choices available.
I digress as this is meant to be a context, MS is a  65 year old  hardworking. single (but not officially divorced) public servant. She has 3 children aged 34, 32, and 30  and she has 2 properties in the South East of England
Property 1 is another 3- bedroom house worth about £380k  with about £100k mortgage, MS currently lives in Property 2 
Property 2 is a flat worth about £180k with at least £100k mortgage- this is rented and MS pays tax on the rental income 
MS separated from her husband about 2 years ago but they are not officially divorced. The husband (HB) lives in Malta and they have little or no contact. However, MS is afraid that if she dies today, then all her properties would transfer to HB. HB and MS married about 10 years ago, but MS had acquired all these assets before they met and they have never actually lived together for more than 6 months. HB has 3 grown up kids not from MS and all the properties are only in MS's name only 
What I know 
- A trust fund is used to avoid a probate. if a will is not drawn up before death, then the benefactors would have to go  through probate in the court 
- A trust  fund provides creditor protection for the inheritance, so if the beneficiaries are in debt or court order, the court cannot seize the assets as part of the court order 
- There are two types of Trust - a lifetime trust which  is effective immediately and MS (or the trustor) can be in charge of the Trust while they are alive and make changes , but must appoint a successor  trustee to step in once the person becomes incapacitated . The second type is a will trust which is created upon death. 
- If the profit ( inheritance?) across the 2 properties above exceeds £325k the beneficiaries are subjected to IHT 
Questions
- What's the difference between a will and a trust fund ? 
Help i'm confused on what else I need to know as i've been researching this for the past 4 hours and not getting anywhere

Yes MS will get some official guidance from a qualified professional but  i'm just trying to provide some preliminary information so she has a basic  knowledge before approaching the market 
Many thanks in advance 

You are indeed confused, as am I after reading this (not least the description of the properties & where your friend lives).

With respect, in addition to 'what else you need to know', you don't actually know what you think you know. Sorry if that sounds harsh.

Best advice would be for your friend to decide exactly what she wants to happen to her assets when she dies, and then to consult a solicitor who can advise on what she needs to do to make sure her wishes are carried out.

xylophone

 (not least the description of the properties & where your friend lives).

Indeed - perhaps the friend actually lives in property 1?

Property 1 is another 3- bedroom house worth about £380k  with about £100k mortgage, MS currently lives in Property 2 
Property 2 is a flat worth about £180k with at least £100k mortgage- this is rented and MS pays tax on the rental income 

babymama89

Mojisola said:

babymama89 said:

MS is a  65 year old  hardworking. single (but not officially divorced) public servant.

As she isn't divorced, she is still married.  If she dies without making a will, her husband will be the main beneficiary of her estate.  That should spur her on to get the will written.

Sure . thanks and yes MS recognises that now and that's the reason i'm doing a research to understand the options

babymama89

badger09 said:

You are indeed confused, as am I after reading this (not least the description of the properties & where your friend lives).

With respect, in addition to 'what else you need to know', you don't actually know what you think you know. Sorry if that sounds harsh.

Best advice would be for your friend to decide exactly what she wants to happen to her assets when she dies, and then to consult a solicitor who can advise on what she needs to do to make sure her wishes are carried out.

Very confused... i thought it was a rather straightforward topic but after 4 hours i still wasnt getting anywhere with the diffrence between a will and a trust fund and even worse different sites use the terms interchangably . 
MS actually lives in property 1 not 2-  Without complicating matters too much MS actually has 3 properties and has already bequested property 1 to DD. but i forgot to remove that comments when i removed the information on the 3rd property. 
In terms of what MS would like- my best guess is that she would like the property to go to the children and not the partner as they are no longer together.

Mojisola

Probate is fairly simple for most estates.  Why create complicated arrangements just to avoid getting it?

It sounds as if what she really needs is some financial planning to avoid inheritance tax.  She could hand over a chunk of her estate now and hope to live for seven more years.

badger09

She should also give serious consideration to a divorce!

xylophone

She should also give serious consideration to a divorce!

She should read 

https://www.civilservicepensionscheme.org.uk/media/193930/pd1_v1-01_amended_30082016-web.pdf

https://www.gov.uk/money-property-when-relationship-ends

Savvy_Sue

babymama89 said:

MS actually lives in property 1 not 2-  Without complicating matters too much MS actually has 3 properties and has already bequested property 1 to DD. but i forgot to remove that comments when i removed the information on the 3rd property. 

In terms of what MS would like- my best guess is that she would like the property to go to the children and not the partner as they are no longer together.

A bequest is made by a will. If she hasn't made a will, she hasn't bequested anything to her DD. She may have told her children what she'd like to happen, and that may include property 1 going to DD, but without a will, DD's got no more right to it than any of her siblings. And her DH may have more right to it than them. (Given the size of the estate, he wouldn't be entitled to all of it, but it could get horrendously messy.)

So, what has happened to property 1? Has she already transferred ownership to her DD? If she has, then she no longer owns it. Is DD living there?