Coop Discretionary Trust and Probate service

qwertygirl23

Hi all, I'm wondering if anyone may have some advice for me.
My father sadly passed away recently but, had updated his will this year. He's set up a discretionary trust for myself (and another beneficiary in case anything happened to me first) as I'm on ESA and PIP due to my own health issues. 
It seemed like a great idea but, something i was reading earlier seemed to suggest there could be as much as 40% tax to pay on anything I/we take out?

He has around 40k in the bank and one property, worth around £90k but needs some work doing.

While discussing his death and his will with the Coop they advised me they do a probate service to take all the worry away and deal with all tax implications etc etc. 
While I have signed the agreement I am wondering if it is worth using them, versus doing it myself - the fixed fee is around 10% of what's in his bank accounts. 
It seemed like a good idea but, I'm having to get details of his bank accounts anyway and utility bills and those are things I know i could definitely do myself but, now don't have to. As well as list any details about "gifts" he made within the last 7 years.
Does anyone have any experience with the coop probate service? They have a 14 day cooling off period and i still have lots of info to send them - including getting a solicitor to sign a copy of my ID and somehow get an original bank statement as online ones arent accepted, despite all bank and utility bills being paperless. At the moment it seems like more work than me doing it myself but my head is just all over the place. We only got the death certificate Thursday and Friday was taken up with the funeral directors. No where is open at weekends so lots of calls to do today to gather details. 

Ive been told his house can go into the trust or into my own name. Hadnt quite decided whether to sell it and buy somewhere more practical/closer to other family, or live in it. After speaking to my mother, I'm 90% sure living in it is going to be best but, I'm wondering if we need to wait for Probate to be granted/completed before we can live in it? Currently out of contract at a privately rented property and it's unlikely anyone will contest the will. 


Sorry post ended up being much longer than i expected as i seemed to have emptied my head. 

GoogleMeNow

I am so sorry for your loss.  

I'm not an expert at all, but here are my thoughts.

I recently lost my mum. 

I used the Tell Us Once service that the registrars told me about, when I was registering mum's death.  That resulted in the Co-op Legal Services contacting me and I had a zoom meeting with one of their advisers.  The adviser went through lots of scenarios of how difficult probate can be when having to deal with HMRC for any inheritance tax to pay.  The adviser made it sound like it would be a lot of work for me at a vulnerable time, fraught with difficulties and that I could find myself in deep trouble if I didn't get it right.

The crunch came when he told me that the cost of them doing the probate was pretty close to £9,000.  I thought that seemed to be a lot of money for what, to me, seemed to be a simple estate.  The only beneficiary was me and my two children were to be given defined cash payments.  The estate is not large and I doubted very much that there would be any inheritance tax to pay. 

It doesn't sound like your father's estate is large either, so presumably no inheritance tax to pay.  You mention your mother.  Is she the main beneficiary of the Will?  

As for living in it, I'm sure you could do that but I believe (others may advise here) you would need to pay "rent" to the estate or be responsible for paying council tax/utilities.

The Co-op Legal Services can also help you sell your home with their highly recommended conveyancing partner.  This is DC Law.  Look up reviews on DC Law - they are part of the Simplify Group which had a massive issue last year with their online service.  I told the adviser that I would choose my own solicitor for the conveyancing. 

Anyway, I decided to decline using their services and have spent several weeks looking at all the forms for applying for probate.  It seemed relatively straight forward so I have applied for probate, but now have to wait to see if they accept the application or not.

I don't know how you approach dealing with the discretionary trust so hopefully other more knowledgeable posters will advise you.

Keep_pedalling

I really think you father made a terrible mistake putting everything into a DT. Yes the cash would cost you your ESA payments but you would have your own house to live in and no one would have the burden of managing the trust. DTs do have some hefty tax liabilities attached to them and are a pain to manage.

Who are the trustees? 

If the trustees are happy their is no reason you can’t move into the property, and if you are within the cooling off period with your coop contract I would cancel it, most people are capable of deal with a simple estate although you will need professional help with the trust. 

In your shoes I would be looking at trying to avoid it ever being set up but that may require a deed of variation from the secondary beneficiary of the trust.

Malthusian

Although a DT could in theory avoid you losing your means tested benefits, I agree it seems unlikely to be worth it for the amounts involved. Then there's this:

Ive been told his house can go into the trust or into my own name.

Told by whom? What does his Will say? He either left it to the trust or to you directly, it can't be both.

If the house is yours, you can't put it into the trust - if you move it into the trust it will be deprivation of assets and you will be assessed for means-tested benefits as if you owned it anyway.

And if the only thing in the trust is £40k in cash I really can't see the point. £40k upfront is better than £40k of means-tested benefits. It should be possible to spend a sum of £40k in a way that improves your life without you losing ESA. (E.g. home adaptations, mobility aids, transport. Or the work that needs doing on the home.)

It seemed like a great idea but, something i was reading earlier seemed to suggest there could be as much as 40% tax to pay on anything I/we take out?

That sounds like the Inheritance Tax exit charge which really shouldn't be an issue for an estate of £130k. Your problem is the extra hassle of managing the trust and the penal tax rates that apply to discretionary trusts.

Is the £90k property and the £40k savings all there is? Nothing is going to your mother?

qwertygirl23

GoogleMeNow said:

The crunch came when he told me that the cost of them doing the probate was pretty close to £9,000.  I thought that seemed to be a lot of money for what, to me, seemed to be a simple estate.  The only beneficiary was me and my two children were to be given defined cash payments.  The estate is not large and I doubted very much that there would be any inheritance tax to pay. 

It doesn't sound like your father's estate is large either, so presumably no inheritance tax to pay.  You mention your mother.  Is she the main beneficiary of the Will?  

As for living in it, I'm sure you could do that but I believe (others may advise here) you would need to pay "rent" to the estate or be responsible for paying council tax/utilities.

The Co-op Legal Services can also help you sell your home with their highly recommended conveyancing partner.  This is DC Law.  Look up reviews on DC Law - they are part of the Simplify Group which had a massive issue last year with their online service.  I told the adviser that I would choose my own solicitor for the conveyancing. 

Anyway, I decided to decline using their services and have spent several weeks looking at all the forms for applying for probate.  It seemed relatively straight forward so I have applied for probate, but now have to wait to see if they accept the application or not.

Ouch, i don't blame you for taking it on yourself at £9000. I was expecting to be quoted around £2000, so over £4000 was quite a shock and likewise had the "it can be difficult, if anything is wrong you're liable" etc. 
My friend thinks she can do it but, she already has some questions she's not sure about. So in the long run it could be better for both of our mental health to have someone take care of things, even though my father would be rolling in his grave (if he were being buried!) 
Parents are divorced and mother lives around 20-25mins from my current house  and 30mins from my dads house. 
Keep_pedalling said:

I really think you father made a terrible mistake putting everything into a DT. Yes the cash would cost you your ESA payments but you would have your own house to live in and no one would have the burden of managing the trust. DTs do have some hefty tax liabilities attached to them and are a pain to manage.

Who are the trustees? 

If the trustees are happy their is no reason you can’t move into the property, and if you are within the cooling off period with your coop contract I would cancel it, most people are capable of deal with a simple estate although you will need professional help with the trust. 

In your shoes I would be looking at trying to avoid it ever being set up but that may require a deed of variation from the secondary beneficiary of the trust.

It certainly does seem that way now. But he'd been trying to put it in my name or into a trust while he was alive, for many years and mostly dodgy companies. After the last attempt I found him a reputable company that did it instead. 

Myself, my friend and the co-op are trustees and executors so shouldn't be any issue moving in and I'm worried about the house being empty over winter. 
Ive looked at the deed of variation and was considering it but have now heard about deed of appointment - the coop offering to wind the trust up and put everything in my name. After asking them about the tax i was advised to speak to a tax specialist so, trust was definitely a mistake! But can rectify it. 

Malthusian said:

Although a DT could in theory avoid you losing your means tested benefits, I agree it seems unlikely to be worth it for the amounts involved. Then there's this:

Ive been told his house can go into the trust or into my own name.

Told by whom? What does his Will say? He either left it to the trust or to you directly, it can't be both.

If the house is yours, you can't put it into the trust - if you move it into the trust it will be deprivation of assets and you will be assessed for means-tested benefits as if you owned it anyway.

And if the only thing in the trust is £40k in cash I really can't see the point. £40k upfront is better than £40k of means-tested benefits. It should be possible to spend a sum of £40k in a way that improves your life without you losing ESA. (E.g. home adaptations, mobility aids, transport. Or the work that needs doing on the home.)

It seemed like a great idea but, something i was reading earlier seemed to suggest there could be as much as 40% tax to pay on anything I/we take out?

That sounds like the Inheritance Tax exit charge which really shouldn't be an issue for an estate of £130k. Your problem is the extra hassle of managing the trust and the penal tax rates that apply to discretionary trusts.

Is the £90k property and the £40k savings all there is? Nothing is going to your mother?

The person i spoke to via video call said it could be put in trust as planned, or in my name if i wished. part of the will says "My Trustees shall hold the capital and income of the Trust Fund upon such trusts in favour or for the benefit of all or such one or more of the Discretionary Beneficiaries"

But I've since been offered a deed of appointment which winds the trust up and despite the loss of benefits it will make things much easier in the short and long term really. 
Thank you for all your help and thoughts.