Will, and property in trust

Fermion

It does sound as though the IFA has set up a Family Probate Preservation Plus Trust (PPPT). This is a complex Estate Planning area and requires specific expertise (not just Wealth Mgt IFA skills).

We went through the process ourselves about 12 months ago but we used a specialist Estate Planning company. The process involved a number of Estate Planning meetings and this resulted in new Wills for both of us. However given the fact that this involved setting up future Discretionary and interest in Possession Trusts on first death, the Estate Planning consultant also produced Will Clarity Statements and Will Commentary documents along the Wills to provide evidence of our discussions and decisions made in our new Will. We understood from the Consultant that this is normal good practice for complex Wills involving Trusts. It worthwhile asking the IFA if these documents were produced alongside the new Will?

I agree with the various responses about deliberate deprivation of assets - the sheets that I have on PPPT Trusts suggest that these are normally set up prior to old age. The main advantages of PPPT Trusts appear to be that they do not add to beneficiaries' estates and impact their own IHT and also to protect beneficiaries' assets if they were subject to divorce proceedings. I do understand that they can be written in such a way with an additional document to protect the RNRB.

AlanF

Thanks Fermion. I am concerned that no such expert estate planning has taken place, but hope to find out more later this week. My wife and I also drew up replacement wills during Covid (I actually found the Co-op will service, which we did via online meetings, to be good), and indeed we received will commentary documents that clearly explained what the wills achieved. As far as I'm aware, no such thing exists with this family member - who has limited comprehension of matters legal, and what seems to be a complex financial situation.
Thanks for your input, appreciated!

AlanF

Had a brief meeting today with the IFA at the family member's house. He has advised that the family trust was created in 2013, with the aim of trying to protect the property from being sold to pay future care costs. She is the sole trustee. HMRC are aware and sent this letter at time. 
Apparently the trust doesn't have a deed, and because it has no income or expenditure there is no requirement for trustee meetings or accounts. The property was gifted/loaned into the trust (in 2022, not sure why the delay), and he says this can easily be reversed.
I pointed out that this all sounds very vague, and that I see little benefit as if she goes into care, the LA would regard it as deprivation of assets. He says not if she lives more than 7 years (and would probably be OK if 5-7 years) then it would be OK, but not if under 2 years.
My understanding is that that is nonsense. Gifting is exempt from IHT after 7 years, but I don't think it's so clear-cut about asset deprivation to avoid care costs.
As one of her executors, and replacement attorney for LPA (and very much on same page as the other 2 attorneys) my thoughts are that this sounds too good and too easy, and could make life difficult for attorneys/executors in the future. I'd be happier asking a solicitor to redraw her will and cancel the trust, if achievable. Trouble is that may be expensive, not sure if she'd be willing to pay.

dunstonh

I pointed out that this all sounds very vague, and that I see little benefit as if she goes into care, the LA would regard it as deprivation of assets. He says not if she lives more than 7 years (and would probably be OK if 5-7 years) then it would be OK, but not if under 2 years.

The 7 year rule doesnt apply to deprivation of assets.  That only applies to IHT.     

The local authority test is whether there was other justification for doing it a the time and the fact it escapes the means test is a coincidence rather than the intention.   Any hint that it was the intention, even if it was 20-30 years ago, then the local authority can include it.

Yorkie1

Did the IFA provide any advice on whether the Trust was liable to a 10-year anniversary IHT charge? We have just gone through that with my parents' trusts.

LHW99

He has advised that the family trust was created in 2013, with the aim of trying to protect the property from being sold to pay future care costs.

I could be wrong, but I seem to remember there was a spate of trusts being created (maybe around that time), where this was proposed by the firms setting them up. I also thought that it was said to be expensive and in some cases was illegal because of the trust structure and should be unwound.

AlanF

I thought I would update on this, having now got some legal advice from a solicitor specialising in Trust issues. 

Just to briefly summarise, the issue was around my 76 year old family member being advised by an IFA (no lawyer involved) to place her property in a 'family trust' - in 2013 - partly to protect the property from the risk if her beneficiary (her son) should get divorced (he did, a few years afterwards!) and partly to protect the property from being sold to avoid care home fees. However, the problem relates to a complete absence of paperwork - no trust deed or documents, not registered with the TRS. The only documentation that exists is a letter from HMRC in 2013 saying that they are not opening a record for the trust because it has no CGT implications, and the Land Registry document which shows the property as being transferred to 'family member of the xxx family trust' (previously just 'family member'). The IFA has declined to provide copies of his advice, saying that he is not obliged to keep records going back to 2013.

Further digging -

1. I've asked HMRC for a copy of the letter written to them in 2013 (their letter, posted earlier in the chain, acknowledges receipt of a letter from the family member - actually sent by the IFA on her behalf). They have said that the reference number no longer checks out (too old) and they consider the Trust to be obsolete as no records since 2013) and they only hold trust records for 7 years.

2. The solicitor has checked with Land Registry who say that the property was never transferred in 2013 when the IFA first created the Trust and transferred the property) - the only record of transfer they have is in 2022.

3. The solicitor has written to the IFA who has sent a very terse reply, much of which contradicts his emails to me - including him now saying that he sent all the trust documentation to our family member in 2013, and as he (IFA) isn't a trustee, he doesn't need to keep a record as it was more than 7 years ago (which begs the question why has he kept a copy of the 2013 HMRC letter?). Even worse, he has now put in writing to the solicitor that the family member and her son are the trustees and beneficiaries, having put (also in writing) to me that the family member is the sole trustee and beneficiary (which he previously justified as the reason for the trust not requiring a deed or any paperwork, as nobody else is involved!)' - direct quote to me in March this year with xxx replacing family member's name - “xxx is the sole trustee and the sole beneficiary, there are no other trustees or beneficiaries at this time, so ONLY xxx controls the trust and at present ONLY xxx benefits from it (hence why there is little documentation).” - letter to solicitor in August 2024 "The Trust established in 2013 was a discretionary trust. The trustees at the time were xxx (settlor) and her son yyy. On establishment of the trust the beneficiaries were xxx and her son yyy"

4. The IFA continues to confuse (in my opinion, at least) the 7 year IHT rule with the no-time-limit deprivation of assets interpretation by Local Authorities. The following is a written quote from him in March this year, where he has stated that after 2 years the onus is on the LA to prove that the deprivation is deliberate (direct quote, xxx being family member) - “As the property has been in Trust for 2-years next month, IF the local authority should the challenge the arrangement,  they would have to evidence xxx set the trust up for the sole purpose of avoiding paying for care fees. Within 2 years they would automatically win this argument. After this (ie from April next month) they would have to prove in a Court xxx had knowledge of a lack or loss of capacity in both 2013 and in 2022 at the time she established the trust and transferred the asset.”

The solicitor has asked us (family member, her son, and myself - son-in law) to decide whether we are of a view that a trust was set up, or not (in the light of the trust not being registered, not having any copy documents, and no action in terms of property transfer being made until 9 years later in 2022). He's also pointed out that if we feel the trust isn't correctly set up, then it would make sense to transfer the property back to the family member's sole name and out of the family trust in terms of managing her affairs - especially if the property needs to be sold.

If the IFA is right (which I seriously doubt) - then he is suggesting we don't need any evidence, as the Local Authority have to prove in court that the family member had knowledge of a loss of capacity in 2013 and 2022 - which she didn't - she has retained capacity throughout, still has capacity now with no significant health concerns, BUT is aged 76. 

My guess, and I hope some of you MSEs may know better, is that the Local Authority aren't going to just back down at a letter from HMRC in 2013 saying that they aren't creating a record for the xxx family trust, along with the Land Registry title being in the name of 'xxx of the xxx family trust' as evidence that the property should be disregarded in a financial assessment. I'm assuming the complete absence of any other evidence of the existence and aims of such trust would make it utterly impossible to defend.

My thoughts are to:

1. Transfer the property back to xxx sole name, through solictior

2. Formally complain to the IFA as an individual, asking him to cover all legal costs relating to this issue on the grounds of having not correctly advised and set up the trust.

3. If that doesn't succeed (and perhaps even if it does?) copy that complaint to the financial services company he currently works for, and has since 2017 (but didn't at the time of the inception of this trust).

4. To complain about the IFA's conduct to regulatory body (Financial Ombudsman, or FSA?).

Any thoughts? And thanks in anticipation!

JoeCrystal

Don't bother complaining to Food Standards Agency! I believe it would be Financial Ombudsman instead? Not sure though.

Marcon

JoeCrystal said:

Don't bother complaining to Food Standards Agency! I believe it would be Financial Ombudsman instead? Not sure though.

If the complaint is about poor financial advice, then it is indeed the Financial Ombudsman. 

dunstonh

If the IFA is right (which I seriously doubt) - then he is suggesting we don't need any evidence, as the Local Authority have to prove in court that the family member had knowledge of a loss of capacity in 2013 and 2022 - which she didn't - she has retained capacity throughout, still has capacity now with no significant health concerns, BUT is aged 76. 

There is no timescale with deprivation of assets.  Timing is important but only in respect of the reasons why assets were removed and whether it was known that means tested benefits could come into play.  i.e. do it after someone has been diagnosed a condition that will likely lead to care being needed then its too late.   Do it before for another justifiable reason, then its not deprivation unless documented that it was done for the purpose of taking assets out of the means test.

A decline in health could play out in weeks, months or years.    

2. Formally complain to the IFA as an individual, asking him to cover all legal costs relating to this issue on the grounds of having not correctly advised and set up the trust.
and
4. To complain about the IFA's conduct to regulatory body (Financial Ombudsman, or FSA?).

This may not be as easy as that.     The person may be an IFA but property trusts are not a business area of an IFA.  When they do it, they are doing it with a different hat on.   Think of a person with two jobs.

The FCA does not regulate property trusts.  It falls under the legal side of things.   So, the regulated financial complaints process (including the FOS) will not be available unless a financial product was involved.

3. If that doesn't succeed (and perhaps even if it does?) copy that complaint to the financial services company he currently works for, and has since 2017 (but didn't at the time of the inception of this trust).

The company carries liability for the regulated advice given by advisers under it during the period they work for them.   They do not have any liability for things that the individual did with other companies (or sole trading)