Trust In Will

Mrs.D

We're in the process of applying for probate for my father.  My mother died in 1996.  We've since found her will where it specified that her nil tax allowance should be put into trust for myself, my sister and any future grandchildren.  It appears the trust was never set up and the whole estate just transferred to my father.   Both trustees named in the will (my father and uncle) are now both deceased.

I'm receiving conflicting advice.  I was initially advised the full £325k nil tax allowance would be able to be transferred to my father for the purposes of probate.  However, I've been told my another advisor that we actually need to now set up the trust with the nil tax rate from 1996 (£154k).

Can anyone help?  Does a trust now need to be set up 26 years later despite both trustees being deceased?  Or as the will was not executed and the estate transferred in full to my father in 1996 can the current rate of nil rate IHT be applied?  I'm so confused!

Thank you! 

Keep_pedalling

It sounds like her executors failed in their duty big time. These sort of trusts were common prior to 2008 when Gordon Brown introduced the transferable NRB which made theses clauses more or less obsolete. That did not make them invalid however and many people fail to review their will decades after making them.

The trust comes into existence on the death of the testator, so I can’t see any way any of her transferable NRB can be uses as 100% of it went into trust, however the that should be sitting in the trust is not part of his estate it is still part of her estate.

Did her executors actually apply for probate? If not  you will now have to do so.

How big is your fathers estate including the amount that should be in trust? 

Are there any grandchildren to benefit from the trust?

SeniorSam

I believe that although the Trust was created on death, the gift into the Trust did not take place and as such the nil rate allowance is still available for transfer. A call to the Probate office should be able to confirm this.

The error could have been corrected by the Trustees with a Promissory note from the Father before he died, but as he has now passed, the Revenue should agree to allow both nil rate band rates as well as both residential allowances.

Mrs.D

Did her executors actually apply for probate? If not  you will now have to do so.

How big is your fathers estate including the amount that should be in trust? 

Are there any grandchildren to benefit from the trust?

Thank you for your response.  Yes, the executors did complete the probate process and that all appears to be in order.

The estate is just over £1m, which includes the amount that should be in trust.

Yes, there are 2 children and 3 grandchildren.

Mrs.D

Thank you @SeniorSam - that sounds like good advice.

Keep_pedalling

Mrs.D said:

Did her executors actually apply for probate? If not  you will now have to do so.

How big is your fathers estate including the amount that should be in trust? 

Are there any grandchildren to benefit from the trust?

Thank you for your response.  Yes, the executors did complete the probate process and that all appears to be in order.

The estate is just over £1m, which includes the amount that should be in trust.

Yes, there are 2 children and 3 grandchildren.

The sort of value that HMRC are going to take a close interest in. I really think you need to take expert professional advice as you not only have the question of IHT, but 5 beneficiaries of a trust that has not been funded because of the negligence or worse, downright dishonesty of the executors of your mother’s estate.

A STEP solicitor who has expertise in inheritance planning and trusts is a must I think.

Mrs.D

Thanks @Keep_pedalling

We have involved a solicitor to handle it and the property sale, but we've had conflicting advice from them.  I think we might need someone more specialist.

Would your understanding be that the trust has to now be physically set up?  Given that the named trustees (who were also the named executors) are deceased, I'm not even sure this would be possible?!

SeniorSam

The Trust was created automatically when your other died, but wishes in the Will were not executed by those appointed executors. Therefore, the nil rate band sum was never put into the Trust and it is to late to do that now.

Clarify with the Probate office, but essentially the nil rate sum at that time was intended to be for you, your sister and any grand children. They have lost out on growth of that amount over the years and the sum owing to you now should be far higher. The executors of the Will have the responsibility of correcting the situation or they may be held responsible.

Are there grand children now?

SeniorSam

An investment of £200,000 over the last 24 years calculates to a considerable amount owing to you, your sister and any grand children.

I do hope that the family are prepared to be reasonable about the distribution of the estate as a very large proportion is needed to satisfy the original Will Trust.

What was the date of death of your Mother as the amount of the Will Trust would be either 154,000 or £200,000 in that year.

Mrs.D

@SeniorSam she died in January 96, so I believe it would be £154k.

Yes, there are 3 grandchildren.

The executors were also the trustees (my father and uncle), but both are now deceased.  That's what makes it even more messy and we didn't know anything about it and can't even ask anyone what happened and why.

SeniorSam

So, if £154,000 were invested in 1996, after 24 years, at only 4% each year that would have grown to£394,749 and at 6% would have been £623,536. That should be the amount of the present estate that is owed to you, your sister and the 3 grandchildren. Do you have an idea of what the estate value is at present, approximately?

As there are now grandchildren, a Trust should be set up with new Trustees, possibly parents?  who can manage the Trust in the future.  If you appoint a professional, such as a solicitor, their rather high charges for being involved will reduce the value considerably over the years. Therefore, if the family can manage the Trust it would be beneficial for all.

You should not be getting conflicting advice or guidance from a solicitor who knows what they are doing.