Life Interest in property and Trusts

Zuffy

Can some one please clarify the correct procedure that should be followed when one of the tenants in common dies . 
Mr F and Mrs F owned a home in equal shares as tenants in common
When Mr F died , Mrs F had a life interest in the property until her passing a few months ago .

1 When Mr F died, Land registry were informed about his death. However the trust that was created to deal with his share of the house was not disclosed to Land registry. Should Land registry have been informed of the trust and will the fact they were not cause any complications when dealing with his estate.

2 Now that Mrs F has passed away does her beneficiary and Mr Fs beneficiaries become the owners of the house ?If so what Land registry forms would need to be completed.

3 Would Land Registry need all the updated information before the house could be sold ?

I would be interested to know your views. 

RAS

Did anyone inform the HMRC about the trust created when Mr F died?

Land_Registry

Zuffy said:

Can some one please clarify the correct procedure that should be followed when one of the tenants in common dies . 
Mr F and Mrs F owned a home in equal shares as tenants in common
When Mr F died , Mrs F had a life interest in the property until her passing a few months ago .

1 When Mr F died, Land registry were informed about his death. However the trust that was created to deal with his share of the house was not disclosed to Land registry. Should Land registry have been informed of the trust and will the fact they were not cause any complications when dealing with his estate.

2 Now that Mrs F has passed away does her beneficiary and Mr Fs beneficiaries become the owners of the house ?If so what Land registry forms would need to be completed.

3 Would Land Registry need all the updated information before the house could be sold ?

I would be interested to know your views. 

1. No as we register the legal ownership. The trust relates to their beneficial ownerships and whilst it can be ‘protected’ on the register, for example as a form A restriction, it doesn’t have to be as the trust still exists as the land register isn’t definitive re such matters. Dealing with his estate would not involve HMLR as the legal ownership of the property doesn’t form part of his estate 
2. The legal ownership passed to Mrs F on his death. And on her death it forms part of her estate. So her executor would deal with the property in accordance with their wills/the trust and divide the beneficial ownerships accordingly. Often a property is sold to enable those beneficial shares to be split as appropriate 
However if the beneficiaries are keeping the property then her executor can transfer it to them as appropriate once probate has been obtained 
3. No - if the property is to be sold then Mrs F’s executor can do that and the buyer would rely on the probate as evidence of both her death and ability to sell 
Find more information re
Joint property ownership  https://www.gov.uk/joint-property-ownership  
Practice Guide 6  https://www.gov.uk/government/publications/devolution-on-the-death-of-a-registered-proprietor  and 

Online guidance re how to deal with the property after Mrs F’s death as appropriate  https://customerhelp.landregistry.gov.uk/guide-external-start/?guideid=e0861516-8882-eb11-a812-000d3ad48f95

Keep_pedalling

The LR do not need to be informed the trust was automatically created by the will. If Mr F died more than two years ago the thrust should have been registered with HMRC.

Zuffy

Ras- HMRC were not informed about the Trust following Mr Fs death . Would this have been a Legal requirement? If it wasn’t done at the time and now Mrs F has died would it still need to be done.

Land Registry - Thank you for your response. I wonder if you could clarify whether the Form A restriction provides enough protection to prevent the sale of a property when one spouse dies. I have read that the surviving spouse can remove the Form A restriction by appointing a trustee. If that is correct how would Land registry deal with it ? How would they contact the executor for the deceased to let them know about the removal of the restriction .I only ask because the details of the executor acting for the deceased would not be known to the Registry. If a Form A restriction were to be removed would there be any protection for the estate of the
deceased?

Keep Pedalling -Mr F died October 2022. Is the 2year period there for a reason. 

Keep_pedalling

Zuffy said:

Ras- HMRC were not informed about the Trust following Mr Fs death . Would this have been a Legal requirement? If it wasn’t done at the time and now Mrs F has died would it still need to be done.

Land Registry - Thank you for your response. I wonder if you could clarify whether the Form A restriction provides enough protection to prevent the sale of a property when one spouse dies. I have read that the surviving spouse can remove the Form A restriction by appointing a trustee. If that is correct how would Land registry deal with it ? How would they contact the executor for the deceased to let them know about the removal of the restriction .I only ask because the details of the executor acting for the deceased would not be known to the Registry. If a Form A restriction were to be removed would there be any protection for the estate of the
deceased?

Keep Pedalling -Mr F died October 2022. Is the 2year period there for a reason. 

A life interest trust created under Will is excluded from registration for a two year period from the date of death. If the trust is to continue beyond the two year period it will require registration. However, the life interest trust may still have to register if it has a UK tax liability eg it is income producing.

I think the 2 year rule is to allow for the period of administration and to allow for the possibility of a deed of trust being carried out during those two years. When, as in this case, the beneficiary of the trust dies within those two years there is no requirement to register it and the trust ends on the death of the beneficiary. 

RAS

IPDI Trusts have an impact on the amount of tax collected from estates.

Transferring 50% of a property to another party absolutely in a will means that when the property is sold (eventually) the beneficiary has to pay CGT on any increase in value, unless they lived there. 

An IDPI trust leaves the beneficial ownership with the survivor whilst the beneficiary's interest is secured by the trust. Since CGT is self reported, keeping tabs on who is liable is a good idea.

doodling

Hi,

Land_Registry said:

[...]

2. The legal ownership passed to Mrs F on his death. And on her death it forms part of her estate. So her executor would deal with the property in accordance with their wills/the trust and divide the beneficial ownerships accordingly. Often a property is sold to enable those beneficial shares to be split as appropriate 
However if the beneficiaries are keeping the property then her executor can transfer it to them as appropriate once probate has been obtained 

[...]

Surely it is more complicated than that as in this case the beneficial ownership is effectively layered with the bottom layer split between the executors of the recently deceased and the trustees of trust created by the will of the previously deceased.  There is then a layer of be eficial ownership above that where beneficial.ownership rests with the beneficiaries of the recently deceased / remaindermen of the trust created by the will of the previously deceased.

The executors of the recently deceased will be responsible for resolving the legal ownership and splitting the value between themselves and the trustees of the previously deceased.

The executors of the recently deceased will then apportion the value of their portion to their beneficiaries as required by the will of the recently deceased and the trustees of the trust created by the will of the previously deceased will then apportion the value of their portion to their remaindermen as per the terms of the trust.

The Land Registry will only see one transaction (which will be by the executors of the recently deceased) but there is more going on.  Of course, a lot of the time the executors, trustees, beneficiaries and remaindermen are all the same people so it gets blurred.

Zuffy

Keep_pedalling and Ras 
Thank you very much for explaining the HMRC side of things .I now have a better understanding of what would need to be done.

Doodling
I am inclined to agree with you that ownership of the home following the death of Mr F is not that straight forward .Although his share is placed in a trust I believe he still owns half the house until it is distributed to his beneficiaries. 

I am not 100% sure what the role of each executor is now that Mrs F has died.
Is it left to Mrs Fs executor to deal with the sale of the house and distribution to all beneficiaries without any involvement of Mr Fs executor,

or

Do both executors have to agree on the sale of the house and carry out any decisions regarding the estate together.

I would be interested to know any thoughts.

Keep_pedalling

RAS said:

IPDI Trusts have an impact on the amount of tax collected from estates.

Transferring 50% of a property to another party absolutely in a will means that when the property is sold (eventually) the beneficiary has to pay CGT on any increase in value, unless they lived there. 

An IDPI trust leaves the beneficial ownership with the survivor whilst the beneficiary's interest is secured by the trust. Since CGT is self reported, keeping tabs on who is liable is a good idea.

CGT should not become an issue where the survivor is a spouse or civil partner. Beneficial ownership resides with the surviving spouse and forms part of their estate for IHT purposes so there will be no CGT to pay on the survivors death. The bequest is also covered by spousal exemption so won’t have used any of the TNRB. 

Newly_retired

I am an executor in a similar position to that of Mrs F's executor. 
What sort of professional do I need to speak to to regularise the transfer of ownership of the family share of a property? As far as I can tell, the property has never been registered with the Land Registry.