Probate/Life Interest Trust Query

Sue365

I am executor for my late parents who owned their property as tenants in common, each owning 50% & had mirror wills both bequeathing their share should pass to me.  They set up a life interest trust instructing that on the death of the first joint owner, the survivor could continue living in the property during their lifetime.

My father passed away first in 2013 and my mother in 2018.  As both their affairs were simple and below the IHT threshold, I was able to administer my father’s estate myself without probate and have also been able to administer the majority of my mother’s estate to date without probate too. 

 I have two questions:

1) In relation to my ownership of their property (currently empty as my husband & I jointly own and live in another house).  We are considering two options a) downsizing, selling our own higher value property & moving into my parents’ property or b) possibly renting it out.

 Depending on which:

a) Does my mother’s death legally necessitate that probate for her must be applied for all eventualities?  Or am I correct that Land Registry will only require this if I wish to sell; or does this also apply if I do not wish to sell?

b) Is there anything else I need to be aware of?

 And

 2) Is there any reason I may not distribute bequeathed monetary legacies to other family members without/or prior to probate if it is necessary?

 All help would be gratefully appreciated please.

xylophone

 Your mother was the last surviving legal  owner of the property and therefore if you wish to transfer the property into your name (or to sell it), probate will be required.

And re completing the forms for probate, note the information here re value and taxation

https://www.thewillbureau.co.uk/news/2018/6/29/what-is-an-immediate-post-death-interest

2) Is there any reason I may not distribute bequeathed monetary legacies to other family members without/or prior to probate if it is necessary?

Your authority as executor to pay these legacies derives from the will - as it will need to go to probate it would seem to me not advisable to pay out any legacies until probate is granted.

Keep_pedalling

Why are you not considering the 3rd option, sell your parents house? If you have no previous experience of being landlords I would recommend doing some in-depth study into what it involves. If is certainly not something that should be undertaken lightly.

Savvy_Sue

Keep_pedalling said:

Why are you not considering the 3rd option, sell your parents house? If you have no previous experience of being landlords I would recommend doing some in-depth study into what it involves. If is certainly not something that should be undertaken lightly.

I agree with this: and also consider whether that house is ideal renting out material in any event? It's possible that location, size and layout do make it the perfect rental, but definitely look at it with a very clear head. If you're wanting to hang onto it for sentimental reasons, remember that it will become someone else's home, and will need to change a lot from the house you have memories of. 

Sue365

Thank you all for your responses.  Further to Xylophone's advice, I have a couple more queries if you are able to help please?

Re the property, in addition to the instruction in both their wills to bequeath their share to me - I have:
1) A copy of a Trust Deed drawn up by the solicitor and signed by my late parents stating that the joint tenancy be severed and the said property shall be held by them as tenants in common in equal shares & also
2) confirmation of the application made to the Land Registry to change the property details in accordance with this created by the deed of severance.  
Your link refers to an IPDI - Does that apply to any type of Trust? 
On reviewing my parents' documentation within the wills it states that it is in fact a 'Property Trust' rather than a 'Life Interest Trust' - how do the two differ, need to be treated for probate or are they both the same?

When there is a Trust Deed is applying for probate realistic to do myself or will I need to involve a solicitor?

 

xylophone

Have you checked the Land Registry to see what  is shown regarding proprietorship of the property?

If not, you should do so.

What exactly is shown?

https://www.gov.uk/search-property-information-land-registry

Sue365

Thank you for your quick response.

I have a copy of register of title, under B: Proprietorship register
Title absolute
1) (date property was bought) My late parents names & address
2) The Transfer to the proprietor(s) contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemity in respect thereof.
3) (date of register of title) RESTRICTION: No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.

Have skimmed info on the gov UK private trust of land website (I'm unable to post link):
are you able to explain what I need to know & take on board in simple layman terms please?

 

xylophone

Further to Xylophone's advice,

Not advice, only comments - it is not permitted for posters to advise.


With regard to the Trust , see

https://helpandadvice.co.uk/property-protection-trust/

Does the above fit the situation?

 If so, it looks to me ( although I am no expert) as if there was indeed an IPDI - however, you  should check this with  the solicitor who drafted  the wills.


As far as I can see (but  you should check with the solicitor), in terms of the ownership of the  property, it was indeed owned by your parents as tenants in common and there was no alteration when the first parent passed away - that is to say, the LR was not advised of his death.

This is not a rare situation.

When your father died, despite the fact that the property was owned as T-i-C, your mother became the sole legal owner of the  property (although because of the fact that you were named as ultimate beneficiary of your father's equitable share, she was the owner of only half the  equity).

See this

https://www.land-registry-documents.co.uk/information/joint-ownership-tennants/

It could have been possible at the time of your father's death for your mother to give permission for you to be recorded as a proprietor in your capacity as Trustee of the IPDI.

As this was not done, it  fell to you as executor of your mother's will to obtain probate of her will in order for you to deal with the transfer/sale of the property.

All in all, as you do not appear to be very confident about dealing with the matter, and in view of your plans for the property/the sale of your own property,  taking the advice of your parents' solicitor in respect of the wills and his  assistance ( and/or the  assistance of his firm's conveyancing partner) could be wise.

It may be necessary to check the CGT situation in respect of any sale proceeds of the property.

The Transfer to the proprietor(s) contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemity in respect thereof.

You can check the covenants etc through the LR - a conveyancing solicitor will be able to explain any matters arising.

getmore4less

Where there is a IPDI trust the life tenant has 100% beneficial interest in the property until the trust is desolved(often death)

that means no CGT(PRR relieve) and 100% of the value is counted in the second estate.

also as long as there is a qualifying beneficiary(of the second to die) they get to use both residential nil rate bands against the property(unless first to die used theirs).

xylophone

100% of the value is counted in the second estate.

This is covered in link in my first post above.

Assets held in an IPDI trust do not count as ‘relevant property’ and, as such, are not subject to this tax regime.

However, instead, even though the property does not actually belong to him/her, for Inheritance Tax purposes, the ‘life tenant’ is treated as if s/he owned the property. This being the case, when the ‘life tenant’ dies the asset or assets in the IPDI are aggregated to his estate and Inheritance Tax is due on the whole amount (minus any Nil Rate Band allowances).

that means no CGT

 Not for the life tenant but I was thinking of the situation of the OP when (if ) she sells the property.

It seems that her mother (who survived father) died in 2018 at which point the life interest trust ended and the OP inherited the property.

It seems that  she did not seek probate at that time ( not clear whether or not the property was valued) but very likely the property has increased in value since that time and there may be a CGT liability?