Discretionary Will Trust Disaster

KaMaHu

Marcon, no money from public purse was used to fund my mum's 2 years in a care home. 

KaMaHu

Marcon we paid a lot of money for Mum's care and did not begrudge a penny. 

xylophone

So as the trust has no demonstrable assets the money still falls into the nil rate band? 

The Trust DOES have an asset - the asset is the IOU which is a LIABILITY of your mother's estate.

£118,000 (rather than the full NRB available (£325.000) was allocated to the Trust. The Trustees decided that rather than require that this cash should actually be paid into an account in the name of the Trust, they would accept an IOU  so that the money would be repaid to the Trust at a later date, when the person who gave the IOU died (if not earlier).

Your mother did not repay the Trust so the debt to the Trust is still outstanding - it must come from her estate. and therefore be deducted from the value of the estate  before IHT is calculated.

It appears that this amount  used  only a certain percentage of your father's nil rate band  as your mother appears to have kept the balance of your father's money for herself and made gifts to offspring as and when she chose.

You should explain these facts to the solicitor dealing with probate - he should be able to advise whether the unused percentage of the NRB is transferable to your mother's estate.

You should also supply the facts and figures mentioned in my previous.

KaMaHu

Thank you so much xylophone I'm starting to make sense of it with your help. 

Marcon

KaMaHu said:

Marcon we paid a lot of money for Mum's care and did not begrudge a penny. 

You'll appreciate that I was basing my responses on your first post: 

In 2002 when my parents made their will they were advised to set up a discretionary will trust. The way that was presented to us was to protect the half of the deceased parent's estate. So half the estate was held for us to inherit and we wouldn't be required to use it to pay for nursing care for the remaining parent and dividing the estate would avoid inheritance tax.


I'm now even more puzzled by this thread!

getmore4less

Marcon said:

KaMaHu said:

Marcon we paid a lot of money for Mum's care and did not begrudge a penny. 

You'll appreciate that I was basing my responses on your first post: 

In 2002 when my parents made their will they were advised to set up a discretionary will trust. The way that was presented to us was to protect the half of the deceased parent's estate. So half the estate was held for us to inherit and we wouldn't be required to use it to pay for nursing care for the remaining parent and dividing the estate would avoid inheritance tax.


I'm now even more puzzled by this thread!

Perfectly reasonable to have a persons assets protected from use by another person for care 

Just as YOUR assets don't have to pay for anyone else's care unless you chose to do that.

Don't you think it  would be more unfair to have it dictated that all you assets should be available for someone else's care rather than just the portion you give up though the current tax system.

It would undermine the basic right we have in this country to give our assets to anyone we want by writing it into a will. 

Do you really want to take that right away?

Marcon

getmore4less said:

Marcon said:

KaMaHu said:

Marcon we paid a lot of money for Mum's care and did not begrudge a penny. 

You'll appreciate that I was basing my responses on your first post: 

In 2002 when my parents made their will they were advised to set up a discretionary will trust. The way that was presented to us was to protect the half of the deceased parent's estate. So half the estate was held for us to inherit and we wouldn't be required to use it to pay for nursing care for the remaining parent and dividing the estate would avoid inheritance tax.


I'm now even more puzzled by this thread!

Perfectly reasonable to have a persons assets protected from use by another person for care 

Just as YOUR assets don't have to pay for anyone else's care unless you chose to do that.

Don't you think it  would be more unfair to have it dictated that all you assets should be available for someone else's care rather than just the portion you give up though the current tax system.

It would undermine the basic right we have in this country to give our assets to anyone we want by writing it into a will. 

Do you really want to take that right away?

Unfortunately that isn't a right we have in this country....and yes, I'm quite happy to ensure that the public purse doesn't pick up the tab where someone would be perfectly able to fund their own care. They might prefer to leave it to their nearest and dearest, but no reason the taxpayer should effectively fund such an inheritance. 

xylophone

Let us be clear.

In a marriage, each party has a right to own his/her own share of assets.
Husband and wife may feely choose to own their  home as beneficial tenants in common and may choose to own their other assets (shares, cash, chattels) as individuals.

Each party has a right to make a will and leave his/her own assets as he/she chooses - this includes his/her beneficial share of the marital home.

Whether a couple own the marital home as joint tenants or tenants in common, if one party needs residential care, the home  cannot be taken into account in the means test (although other assets owned by that party, whether solely or as a proportion of joint accounts) can be.

If both parties require care, then the home and other assets will all be taken into account in the means test, regardless of any will.

KaMaHu

Marcon, I know that I'm lucky to be inheriting anything. But it seems so sad to pay tax on an estate of the same value as people who won't have to pay that tax. If you see what I mean. 

Keep_pedalling

KaMaHu said:

Marcon, I know that I'm lucky to be inheriting anything. But it seems so sad to pay tax on an estate of the same value as people who won't have to pay that tax. If you see what I mean. 

The lesson here, is that not only is it important to have a will, but to review it regularly and get a new one  when there are major changes in your life or, if you have those sort of assets, IHT legislation changes.

There must be 10s of 1000s of wills out there with redundant clauses like this in them, many more with dead or very elderly executors still named. How many don’t get new wills when their children become adults, so the solicitor to brother Charlie are no longer the best choice as executors. Sometimes an out if date will can be worse than no will at all.