Will Trusts

Dilbert_Investor

My mum passed away nearly two years ago.

She left a ‘DIY’ will which appears to set up a Will trust for her ‘share’ of the property to be left to me and my brother and gave dad the right to remain in the house.

The property was however held as joint tenancy and was near severed.

My bother and I, who were the executors and beneficiaries, didn't think this was possible given the joint tenancy and didn't think that reflected what she wanted later in life.  We agreed the estate should go 100% to dad in case he needed it for care in later life.

We made a note of it and signed a letter for the record and give all the estate directly to dad.  We didn’t notify any authorities by now dad has passed too are wondering whether we should have as we are being asked for her will too.

Also we don’t believe a will trust can be established with a joint tenancy so wasn’t possible anyway - is this correct?

Thanks.

Keep_pedalling

Who is asking for her will?

You are correct your father would have automatically become the sole owner on your mother’s death. 

Dilbert_Investor

Hi,

I’m looking at the IHT tax forms for HMRC for transferring her unused nil rate band which asks for a copy of her Will.

My concern is that we treated the process as Dad becoming sole owner, given survivoship rules, but my mums Will was written as setting up a Will Trust for her interest in the property (if any) despite the property being a joint tenancy.

We took the view as this wasn't possible ( as she had no interest) we would treat the estate as you describe, but other than a note for our record we didn’t advise HMRC and write a variation.

Did we need to do so?

Thanks

msb1234

Did her will go through probate?

Dilbert_Investor

Yes it did for a bank.   Was a DIY will so I guess thats why it said any interest she had in the property (if any).

Keep_pedalling

The bequest to set up the will trust failed as the house was not heritable. There was therefore no trust and no need to inform HMRC of the trusts existence. You could always add a covering letter with your submission.

What was the value of your father’s estate? If it’s under £625k you don’t even need to do a return.  

Dilbert_Investor

Thanks.  We made a note at the time and will probably include this.

Dads estate is likely to over that so we need to do a full return for the Residence Nil Rate Band transfer.

Dilbert_Investor

Keep Pedalling - Would the fact that the house couldn’t go in the trust (just the residual estate) and that it went straight to Dad need a deed of variation to be drawn up to reflect this legally?

I wouldn’t want HRMC considering that mum used any of her nil rate band up when she didn’t.

The rest of the residual estate was paid out to the beneficiary (her husband) within two years, so again shouldn’t have impact her allowance either.

Would appreciate any thoughts.

Keep_pedalling

Dilbert_Investor said:

Keep Pedalling - Would the fact that the house couldn’t go in the trust (just the residual estate) and that it went straight to Dad need a deed of variation to be drawn up to reflect this legally?

I wouldn’t want HRMC considering that mum used any of her nil rate band up when she didn’t.

The rest of the residual estate was paid out to the beneficiary (her husband) within two years, so again shouldn’t have impact her allowance either.

Would appreciate any thoughts.

No, the bequest would simply fail and house automatically becomes 100% owned by the surviving owner. 

Just to clarify was her residual estate also to go in to trust?

Dilbert_Investor

Yes, but ‘upon trust absolutely for her husband’.  Is was just cash from one bank account.

This was paid to him within 2 years.

Keep_pedalling

Dilbert_Investor said:

Yes, but ‘upon trust absolutely for her husband’.  Is was just cash from one bank account.

This was paid to him within 2 years.

The use of the term trust there has a somewhat different meaning to the failed will trust. The bequest is held in trust by the executors until, it can be distributed to the beneficiary, so while the estate is being wound up the asset is effectively held in a absolute / bare trust for the sole benefit of the beneficiary. This does not need to be registered with HMRC.