Deed of Variation R Removal of Unborn Beneficiaries In A Discretionary Trust

theoretica

Sounds like you want to do a deed of variation with the residual estate going IHT free to your mother and no trust?  Looks like a simpler question that way.

Grumpy_chap

theoretica said:

Sounds like you want to do a deed of variation with the residual estate going IHT free to your mother and no trust?  Looks like a simpler question that way.

That is a simpler question but, AIUI, a DoV can only be processed if agreed by all parties that may be negatively impacted by the change.  The unborn future children are not in a position to agree to give up their elements of the inheritance.

silvercar

I don’t understand the limits of this, was the father’s intention to leave money to his grandchildren, great grandchildren, great-great grandchildren….where would it end so that those intended to have the residual estate could actually inherit? Is there a time limit on how long you wait for the future generations to be born? 

theoretica

Grumpy_chap said:

theoretica said:

Sounds like you want to do a deed of variation with the residual estate going IHT free to your mother and no trust?  Looks like a simpler question that way.

That is a simpler question but, AIUI, a DoV can only be processed if agreed by all parties that may be negatively impacted by the change.  The unborn future children are not in a position to agree to give up their elements of the inheritance.

It is a discretionary trust - so the unborn grandchildren are not entitled to anything.  The children could decide to pay out the whole trust to themselves and spend it - same result, nothing for the grandchildren.

SisterMichael

theoretica said:

Sounds like you want to do a deed of variation with the residual estate going IHT free to your mother and no trust?  Looks like a simpler question that way.

Astute, although the situation is a little more complicated than that (going into any more detail may make us identifiable).

The estate is valued in the 100s of thousands, not millions and most of that is the house price for the property at which our father lived at the time of his passing. We are trying to not pay any more IHT than we legally have to as it would mean we would have to sell the property in order to pay the IHT which we are trying to avoid.

SisterMichael

Grumpy_chap said:

That is a simpler question but, AIUI, a DoV can only be processed if agreed by all parties that may be negatively impacted by the change.  The unborn future children are not in a position to agree to give up their elements of the inheritance.

This appears to be the crux of the matter. The irony is that we do not wish to disinherit any unborn future children and would still seek to include them in the manner intended by our father in the Will/Trust. We are merely trying to include mum (as we are also not inclined to sell the property, the capital that is the value of the property would remain within the Trust). 

Yet, the Will/Trust has been written in such a way that we cannot add our mum as a beneficiary. 

It has been suggested to us by more than one party that it is one of the worst written Wills/Trusts they have seen. 

SisterMichael

silvercar said:

I don’t understand the limits of this, was the father’s intention to leave money to his grandchildren, great grandchildren, great-great grandchildren….where would it end so that those intended to have the residual estate could actually inherit? Is there a time limit on how long you wait for the future generations to be born? 

This point you make is causing us immense frustration. Nobody knows what our father's actual intention was, as he did not discuss any of it with any of us and his friends deny all knowledge, beyond what we suppose his intention was based upon the man we knew him to be. He has specified nothing remotely as what you suggest re: time limits etc.

We are just about to appoint a STEP-accredited firm with good experience in Contentious Trusts, IHT, Wills & Estate Planning based on a personal recommendation we have now received. It will be interesting to see what they make of it all and I will try to update what I can here in case it helps others. 

Having said that, I am fairly confident there are few people on the planet quite like our father was so it may all just be relevant to us.... 

SisterMichael

theoretica said:

It is a discretionary trust - so the unborn grandchildren are not entitled to anything.  The children could decide to pay out the whole trust to themselves and spend it - same result, nothing for the grandchildren.

I so wish this was actually the case but we are being repeatedly told that it isn't (even though the Will itself gives us 4 children solely power as trustees and states that we have the power to remove beneficiaries which we had assumed might mean unborn future children, so that we can carry out a deed of variation).

On top of which, doing things that way would immediately mean we have to sell the property in order to pay the IHT fee as we are not generally people of financial means.

poseidon1

SisterMichael said:

theoretica said:

It is a discretionary trust - so the unborn grandchildren are not entitled to anything.  The children could decide to pay out the whole trust to themselves and spend it - same result, nothing for the grandchildren.

I so wish this was actually the case but we are being repeatedly told that it isn't (even though the Will itself gives us 4 children solely power as trustees and states that we have the power to remove beneficiaries which we had assumed might mean unborn future children, so that we can carry out a deed of variation).

On top of which, doing things that way would immediately mean we have to sell the property in order to pay the IHT fee as we are not generally people of financial means.

Seems to me an ideal solution would be a variation of the will that provides a trust for life to your mother of the house thereby  using the spouse exemption to reduce/eradicate the present IHT exposure , and on her death the house reverts back to the discretionary trust to be held as originally intended. Depending on the value of the house at that point, there may well be an IHT entry charge, but at least deferred for awhile, and with the benefit of your mother's nil rate band which is not being utilised at all.

Lawyers may well be able to convince the Courts this would ultimately benefit  ( rather than disadvantage ) future unborns, by enlarging the trust funds available via the mother's nil rate band mitigating some or all of the IHT currently chargeable. Be interesting to see if your lawyers see things the same way.

SisterMichael

poseidon1 said: 

Seems to me an ideal solution would be a variation of the will that provides a trust for life to your mother of the house thereby  using the spouse exemption to reduce/eradicate the present IHT exposure , and on her death the house reverts back to the discretionary trust to be held as originally intended. Depending on the value of the house at that point, there may well be an IHT entry charge, but at least deferred for awhile, and with the benefit of your mother's nil rate band which is not being utilised at all.

Lawyers may well be able to convince the Courts this would ultimately benefit  ( rather than disadvantage ) future unborns, by enlarging the trust funds available via the mother's nil rate band mitigating some or all of the IHT currently chargeable. Be interesting to see if your lawyers see things the same way.

We have (none of us 4) any knowledge or experience of legal matters but, when discussing it amongst ourselves, this is the only viable option we have come up with too which hopefully would satisfy all the restrictions we will encounter.

It is somewhat reassuring that you think this a possible route through too as (might be off base here) I sense that you have something of a legal background (whereas we are making guesses based on rudimentary reading and what we have learned from people who know more about it than we do).

We have already paid some IHT (a stab in the dark figure, the funds being taken from our father's estate and leaving little else left other than his car and his house) and understand that more IHT may/will need to be paid at some point but deferring it a while until we essentially get our socks on would be helpful and buy us thinking time. 

Will certainly keep the thread updated and we are very grateful for what we have learned from the thread. The firm we are about to appoint look like they know their stuff.