Trustee of a property

garfie80

I agreed to being an executor of my Mother-in-Law's will. This also included holding her house in trust. This was because she had her youngest son living with her. Her idea was that he could stay there, paying rent to the other two beneficiaries for as long as he wanted. Her daughter (my wife) has no problem with this and is very happy for him to stay there. The oldest brother, however is a jealous and spiteful little git who has been trying to get him to move out. As a result, he looks for reasons to throw up some hurdle he wants me as a trustee to jump for him. In his mind, he thinks that if I give up, he can then force the sale of the house. 
So far, I've had he house professionally valued and set a fair rent. The tenant (younger brother) pays his rent on time and there's been no problems at all with the house (it's actually next door to me so easy to keep an eye on) and the youngest son is a good tenant and neighbour.
As a trustee (there are two of us, as I appointed a cousin of the beneficiaries just to be able to take over should anything happen to me), I hold no money for the 3 beneficiaries. All the money I get is distributed immediately between them. Any costs such as house insurance and repairs etc, are taken directly from the rent money. If the bill is larger than the rent, I pay it and take it back from subsequent rent payments. I never make any charge for this and make nothing from it. I'm happy to do it as it benefits my wife and her younger brother.
This week, I've had an email from the oldest brother demanding a list of payments I've made to him with dates for his accountant to complete his tax return. He also demands a set of accounts for the tax year year 2020/2021.
I've always made it clear that each beneficiary is responsible for their own tax on any income they receive. They will have a record of payments made as each is paid by bank transfer.
So my question for those would know is, do I have to provide accounts and do I have to provide information that he should already have? If I do, this will ultimately hurt the 3 of them financially, as I'm certainly not going to be left out pocket if I have to engage an accountant or a solicitor.

Keep_pedalling

You need to take professional advice. If the house is held in trust then any rent should be paid to the trust and the trust should be paying the tax. As it stands you are expecting those in receipt of the rent to pay tax on it, yet because you (on behalf of the trust) are paying the bills for the upkeep of the property they can’t offset those expenses against income as they have no visibility of them.

Taxation of trusts can be complex and depends on the type of trust. Any advice you do take should be paid by the trust not your personally, but if you get this wrong you could find yourself in hot water with HMRC.

xylophone

I agreed to being an executor of my Mother-in-Law's will. This also included holding her house in trust. This was because she had her youngest son living with her. Her idea was that he could stay there, paying rent to the other two beneficiaries for as long as he wanted.

What exactly does your MiL's will say in  respect of the property?

garfie80

xylophone said:

I agreed to being an executor of my Mother-in-Law's will. This also included holding her house in trust. This was because she had her youngest son living with her. Her idea was that he could stay there, paying rent to the other two beneficiaries for as long as he wanted.

What exactly does your MiL's will say in  respect of the property?

Hi, this is the section that I think is probably relevant:-

"10.3 The Property Trustees shall permit the Occupant to live in the Property for the Period of Occupation at a rent agreed by the Property Trustees based on the property value and of expert advice.

10.3.1 paying all rates, taxes and other outgoings of a recurring nature in respect of the Property including the reimbursement of all  premiums on any insurance policies taken out by the Property Trustees

10.3.2 maintaining the Property in good and tenantable repair to the satisfaction of the Property Trustees

10.3.3     not to substantially alter the Property without the prior consent of the Property Trustees

1003.4 allowing the Property Trustees to enter and inspect the Property after being given reasonable notice."

As far as I can see, the tenant is responsible for all the bills, except repairs to the property.

getmore4less

10.3.2 including repairs

xylophone

As far as I can see, the tenant is responsible for all the bills, except repairs to the property.

As getmoreforless says, see

10.3.2 maintaining the Property in good and tenantable repair to the satisfaction of the Property Trustees.

The Occupant also has to cover the cost of the insurance  taken out by the Trustees so I think that the agreement is very similar to what is termed a "full repairing lease".

Does the Trust Deed specify that the Occupant can only be this  particular  offspring of the deceased and then if he chooses to move out the property must be sold?

Does the Deed specify that the only beneficiaries of Trust income are  the other offspring of the deceased but that should the property be sold the capital proceeds must be shared equally between all three offspring of the deceased?

The Trust is not in any shape or form discretionary?

RetSol

"10.3 The Property Trustees shall permit the Occupant to live in the Property for the Period of Occupation

How does the will define "Period of Occupation"?

Any costs such as house insurance and repairs etc, are taken directly from the rent money

This is contrary to the terms of the will, @garfie80.  As such, it is a potential, legitimate ground for complaint by the oldest brother (and your wife).  The beneficiaries have recourse against the trustees if the trustees do not comply with the terms of the trust. 

HobgoblinBT

The beneficiary demanding accounts has really opened a hornets nest.  As the trust has income I recommend that you look at the HM Gov website under trusts and taxes.  https://www.gov.uk/trusts-taxes

My wife and I are trustees of a trust for which the main beneficiary is my mentally handicapped brother in law and we have been through this for two trusts.  We had to register the trust with HMRC and then complete annual tax returns.  The trustees are responsible for the trust paying any taxes due from the trust.

You can set various reasonable expenses against tax such as an annual gas safety certificate, 5 yearly electricity inspection certificates (required by law for all rental properties) home insurance, repairs and maintenance.

I keep a simple set of accounts, listing income and expenditure.  I use these to complete the annual tax return.

The trust tax forms and guidance notes are available to download from the HM Gov website, but I now submit tax returns online via privately purchased software compatible with trust tax returns.

I found the website and HMRC phone service very useful to guide me, but if you require more assistance than this you might be best to engage an accountant.

Hope this helps.

RetSol

Looking at the link supplied by @HobgoblinBT, the bottom line is that, unless the trust's income goes straight to the beneficiaries, the trustees are accountable to HMRC for the tax on it.  The income will go straight to the beneficiaries if (i) the trust is an interest in possession trust and the income has been mandated to the beneficiaries or (ii) the trust is a bare trust. 
I think that the trustees here have some work to do to ensure that they are on the right side of the beneficiaries and HMRC.  

garfie80

xylophone said:

As far as I can see, the tenant is responsible for all the bills, except repairs to the property.

As getmoreforless says, see

10.3.2 maintaining the Property in good and tenantable repair to the satisfaction of the Property Trustees.

The Occupant also has to cover the cost of the insurance  taken out by the Trustees so I think that the agreement is very similar to what is termed a "full repairing lease".

Does the Trust Deed specify that the Occupant can only be this  particular  offspring of the deceased and then if he chooses to move out the property must be sold?

Does the Deed specify that the only beneficiaries of Trust income are  the other offspring of the deceased but that should the property be sold the capital proceeds must be shared equally between all three offspring of the deceased?

The Trust is not in any shape or form discretionary?

That's correct. Rent goes to all three beneficiaries, one of who happens to be the tenant also.
The maintenance part doesn't mean he's responsible for all maintenance, only that he doesn't trash the place. This is covered elsewhere in the will.
If for any reason he has to move out, then the property is to be sold and the proceeds divided equally between all three beneficiaries. There are no other beneficiaries to the will,  only her surviving children.

RetSol

10.3.2 maintaining the Property in good and tenantable repair to the satisfaction of the Property Trustees.

Thank you, @garfie80, for your response.  

Does the will impose the quoted obligation on the Occupant?  If so, he is obliged to maintain the property in the condition that a reasonable tenant likely to take a lease of the property would expect.  As @xylophone suggests, it is a typical repairing covenant.  It is more onerous than an obligation simply not to trash the property.

The maintenance part doesn't mean he's responsible for all maintenance, only that he doesn't trash the place. This is covered elsewhere in the will.

What does the will say "elsewhere" about maintenance and the costs of maintenance?