Estate advice

Good evening, 

I am doing some 'estate planning' with my parents who have appointed me LPOA for them both and just wanted some advice or guidance on the following:

My parents have been married approx 30+ years and are still together, they own the home they live in outright.

Currently the home is registered solely in my fathers name. My mother is not on the deeds etc. 

My parents are getting older (father especially) and having discussions about their future plans etc. My mum is a good bit younger than my dad and has stated she would "never put him in a home" if he declines (Yes, I am aware everyone says this, as I work in a field where we see lots of people go into care homes). 

Currently my thinking is that they need to change the ownership from solely in my father's name, to being in both my mother's and my father's name, 

Futher to this, we are then exploring options of whether this should be done as joint tenants, or tenants in common.

If going with tenants in common, then we have read that they can put that when one of them passes away, the 50% of the property they own can be passed to their children, with a stipulation that the remaining partner can live out their years in the home. 

If this was the case, does the 50% HAVE TO go into some sort of 'Property protection trust / family protection trust'? or can the 50% simply pass into ownership of the children? 

Any idea of the cost of setting up a trust in this way? Property value approx £800k - £850k.  

Comments

  • RAS
    RAS Posts: 32,453
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    If they decide to go for tenants in common, generally the will includes the right of the surviving spouse to live in the property during their life, or until they co-habit or remarry. This may well create a life interest trust, the terms of which are set up by the will. The couple should discuss the details together and with their solicitor. Property protection or family protection trusts aren't necessary and a lot of trusts created in older wills result in additional tax and management costs. 

    The advantages over joint tenancy are that the life interest trust protects half the value of the property if:

    a) The survivor needs care
    b) The survivor remarries, rendering void any inheritance to children of the marriage, or a previous marriage of the first deceased.
    c) Or the survivor changes their will.

    Leaving the first deceased's half to the children absolutely makes them liable for CGT when the house is sold, unless they have been resident.

    Joint tenancy means that the house become owned solely by the surviving spouse and is fully exposed to the costs of care (possibly not an issue given the value of this property), and changes in beneficiaries because of a remarriage or a new will.
    The person who has not made a mistake, has made nothing
  • Keep_pedalling
    Keep_pedalling Posts: 16,183
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    It is certainly right that your father being the sole owner needs to change to joint ownership, the days of the man owning the marital home are long gone. Owning as joint tenants makes each share heritage property that can be left in a will, so they can make mirror wills that puts their share into an immediate post-death interest trust (IPDIT). The trust would be created by the will so apart from registering the trust with HMRC within 2 years of the first death nothing further needs to be done until the surviving spouse dies or moves out.

    Assuming you father dies first, your mother would become the sole beneficial owner with legal ownership of his share being held by the trust. Hopefully your mother’s 50% legal share would be ample to cover any care costs she might need, and the primary reason for the trust is to protect his share from going to someone ease if your mother changed her will (it happens) or she remarries and fails to make a new one. The other reason for using this type of trust is the it is the most tax effective option, regardless of the value his share will still be covered by the spousal exemption and it won’t be subject to CGT when it is eventually sold.

    I don’t think having an additional clause ending the trust in the event of remarriage or cohabiting is a goer. The surviving spouse is still going to be a legal owner of the house so only a court order could force a sale in these circumstances and that would involve considerable legal costs and is likely to fail. That is more appropriate for couples with more complex family set ups such as a second marriage where one on the spouses has no financial interest in the home.

    They really should not delay seeing a solicitor with regard the property transfer and making appropriate wills.
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