Making a right to reside will

getmore4less

The right to reside is typically done with IPDI trust as it avoids CGT issues for a non resident that will inherit later as it is taxed as if the life tenant has 100% beneficial interest.

It protects the surviver more than just having the share inherited immediately.

For married it is IHT  spouse exempt and allows transferable nil rate bands.


You could have  the son inherit 1/2 the property and as his main residence it should qualify for PRR but that still leaves the risk of son wanting to cash in their share.

Does downsize work if it to remain main residence of survivor and son.

bjbyorkshire

Thanks again Getmoreore4less.  

Gaptital Gains tax is another issue.  Husband was given the house we all live in by his mother. He later gave me a half share as joint tenants, we changed this when we made wills almost 10 years ago to tenants in common at the point where our daughter had died suddenly.  We inherited her half share of a small house that husband and her had joint tenants status of.  We did give son some money when we sold this property after a not very happy experience of renting it out to make up for the drop in value in property prices.  

My aim now is to make things as simple as I can in case it is me who pops off first.  The husband and son could live amicably together but son and myself can fall out quite easily so living together long term may not work out for us.  I think you can see why I am hesitant about going down the route of the Trust with right to reside.  As someone pointed out he could get married, adamantly states that he won't, he could get into a pile of debt, I don't forsee this but hey who knows, which if he had been granted to 50% share upon the first death would love the survivor of us in a very awkward situation.  

I think downsizing would be on the cards for me but not for husband.  He has lived here for more than 60 years and wouldn't contemplate moving from this village.  He has a decent personal pension but I would only get half of that so my circumastances could be a bit more constrained in maintaining the house and managing the upkeep.

Maybe it would be a more straightforward option for us to just make mirror wills, not leave anything to son until last death but give him £3000 each per year as allowed and make him promise to keep this in an account earning some interest in case there is no house to inherit.  That way he may have enough to put down on a shoe box of his own one day.

All the replies above have been most helpful in making me understand the Trust aspect.  I haven't phoned round for any other quotes as I haven't fully decided which way we go yet.

Many thanks  

Brie

When a friend's parent were heading towards becoming elderly and ill they made wills both of which gave the son that individual's share of the property.  So when mom died he got 50%, when dad died he got the rest.  So very straight forward.

I think though what you are talking about is something that would not allow the son to be kicked out and the house sold should the parents become ill and need permanent care paid for.  My understanding from talking to our local council is that the son would only be allowed to stay residing if he was over 60 as they wouldn't make him homeless.  They could however still put a charge on the house which would mean when he eventually sold it some of the money would go to the council to cover the care costs.  I don't see how a trust will get around this but the solicitor might be able to explain.   I would love to know if s/he has a different opinion.

bjbyorkshire

Thant wasn't our intention Brie.  The scenario you give above is exactly what our aim is to do but I'm also considering the issue of son not being able to put either of us in a vulnerable position while the survivor is alive.  

We do have a savings pot that along with pensions and other benefits plus the £85,000 or is it £83,000 cap which is due to come into being at some point, we would be able to finance a care home for quite some time.  All sorts of scenarios to consider and thanks for the  heads up.  

getmore4less

There is no £3k limit on gifts.

That is just the amount that is exempt anything else becomes a PET, and drops of the estate in 7 years.

If IHT is not an issue then larger gifts won't be either.

Not sure why you think there are CGT issues.

The right to live, life interest trust(IPDI) protects(1/2) against remarrying and care fees.

Could be an issue if the surviver may need the asset to live on at some point.

A life interest can have clauses that is dissolves if the survivor moves on with a new partner.

Keep_pedalling

bjbyorkshire said:

Thanks, Get More for Less.  I had not heard about IPDI trusts so had to Google it.  Not sure I understand it now I've read it several times.  

I can say that this is my sons only home.  He lives and works all over the country so his clothes, possessions, post, car insurance all use his/our home address.  He comes home when he has a long weekend or a holiday period and last year worked from here for 6 months.  He lives in short term rented accommodation when away which means that out of his salary he couldn't afford to pay rent and bills plus taking on a mortgage as a single chap.

The IPDI reading sounds as though this is used for cutting down on inheritance tax but in our case that will not apply and there would be no income or money in the trust to accrue anything that son may want to access.  It is purely a way of him having half of our house on the first death and half on the second death.  This I felt would give him some security and also mean that the survivor of us wouldn't be able to be moved out of the house by our son if he should decide it could be a good idea to sell his half share to a mate for £xxx who may then become the co owner of this property.  I don't think son would do this but who knows what goes on in someones mind when a large amount of money is dangled before their eyes.

I'm being ultra cautious, as is my way.  Trying to be a good parent and sorting our affairs out in good time for whoever is going to deal with our estate in the event of first death.  I could deal with things if husband was the first to go but he would definately not be able to sort things out without the help of either son or a solicitor.  He isn't interested in reading up on what is required as he thinks a solicitor would sort things out.  Yes they would but at what cost????

Do any of you good people think that us making simple mirror wills leaving half of the house to son but not putting it into a trust on first death would be a big no no?  It would mean registering the house in son and survivors names.

Thanks

No,I don’t think it would be a good idea to do that. If he was in a position to buy before the second death he would have lost his first time buyer status so would be paying a lot more stamp duty. The same would also apply if he wanted to sell up and buy his own place on the second death. 

He may end up renting in another part of the country for work, so it would no longer be his primary residence so could end up with a capital gains tax bill he would not otherwise have had.

The purpose of the trusts is not to save IHT, but to provide a level of protection and security to all parties.

Brie

Good to know you're looking into the options but you might want to check out what care actually costs.

MiL was in a place on the south coast, nice place but not fancy.  £4k a month.  Her brother was in one in London somewhere £7k a month so your £85k might last one of you about a year depending on location.  Home care for MiL is costing her about £25 an hour and she only has 3 hours a week so well within her means currently.  We expect this to ramp up to a couple/few hours a day in the next year so will clear out her savings quite quickly.  Obviously her pension is very good at covering the current costs but won't in the future.

theoretica

bjbyorkshire said:

 Our aim is not to avoid care home fees but more to give our adult son a share in our home upon the first death. 

Why do you want to do this and what do you want to avoid?

One thing to take into account is the way legislation changes every now and again, which can land people with something which made sense when it was written, but is a pain some years later.  Can happen with trusts set up to take advantage of a loophole that is then closed. 

getmore4less

IPDI trusts are not really a loophole the last round of changes to life trust protected this setup.

bjbyorkshire

Thanks for all your comments.  I now have a better idea of our options.  There are a few questions relevant to our situation to ask the solicitor when we have a conversation prior to setting up our wills.  He has agreed that early in the new year will be a good time for all of us.

Many thanks